Mar 06, 2010

"If financial regulatory reform becomes law, what then? No one can know whether the new rules taking shape in Congress will go far enough to prevent a repeat of the last crisis. Will the jumble of hybrid agencies proposed to enforce those rules get off the ground and function properly?

Will the reforms unleash unforeseen problems? After all, banking experts are still arguing 10 years later about the effectiveness of the 1999 Gramm-Leach-Bliley law and whether it brought on the era of excessive risk taking that caused the recent financial meltdown -- even former Republican Rep. Jim Leach, who co-authored the act, says he's not sure.

The negotiations in the Senate this week toward a compromise have bill set the stage to test President Obama's renewed hopes of bipartisanship. To further that cause, Obama and Democratic congressional leaders have greatly scaled back their ambitions and left to future regulators many details of how the reform would work. Divided authority and workload among different regulatory agencies will likely persist, and questions about the length of the transition and how to pay for bank failures remain uncertain. Exemptions and exceptions are likely for retailers, car dealers, insurers, and smaller banks. All this has led some analysts to wonder whether the compromises have made the reform plan ineffective."

Click to go to the National Journal website and view the entire article.