A Dubious Way to Prevent Fiscal Crisis


By JOE NOCERA
The New York Times
June 4, 2010


Last November, when I took a temporary powder, the subject du jour — at least in this little corner — was financial regulatory reform. Today, eight months later (ouch!), as I return from my hiatus, the subject du jour is financial regulatory reform.

Back then, the question was whether Congress could muster the votes to even pass a reform bill. Health care dominated the body politic. Financial lobbyists were swarming. Senate Republicans were doing their foot-dragging thing. And so on.

Today, the question is a different one. Very soon, possibly as early as next week, House and Senate conferees will begin meeting to hammer out the compromises necessary to turn the bills they wound up passing in the interim into something President Obama can sign into law. There are plenty of differences between the House bill, which passed in December, and the Senate version that passed a few weeks ago, and there will be lots to haggle over in the conference committee. But broadly speaking, they’re not that different. They both contain a new consumer protection agency, and they both take the same general approach to everything from systemic risk to the ratings agencies.

And thus it’s not too early to ask: Will the bill that emerges from this conference do what it is intended to do? Will it prevent another crisis? Will it put an end to government bailouts? The painful answer is: probably not.

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In the first place, there is nothing even remotely radical about anything in these bills. Nobody is suggesting setting up a new Securities and Exchange Commission, which reshaped Wall Street regulation when it was formed in 1934. Nobody is talking about breaking up banks the way they did in the 1930s with the passage of the Glass-Steagall Act. Nobody is even talking about a wholesale revamping of a regulatory system that so clearly failed in this crisis. “They are trying to attack the symptoms, instead of the basic issues,â€