Financial regulation lags after Dodd-Frank
It's been a year since Congress passed and President Barack Obama signed into law the most sweeping financial reform since the Great Depression. But as of the Dodd-Frank Act's July 21 anniversary, regulators had completed only 49 of the hundreds of rules mandated by the 2,000-plus page law.
This article was originally published by Bankrate.com on Thursday, July 21, 2011.
By Katherine Reynolds Lewis • Bankrate.com
Are you any better off now than before new financial regulations became law? When it was signed into law, Dodd-Frank drew a line in the sand on mortgage abuses, predatory lending, credit information and other vital issues for consumers. But since then, the dozen-plus regulators writing the rules under the new FinReg law have struggled to work out most of the specifics. The law sets more than 240 deadlines for 22 different regulators to write rules, issue recommendations and write reports in the implementation of Dodd-Frank. Most deadlines must be met by only 10 regulators.
"In one sense, everything's different because financial institutions know what's coming, so they're already anticipating and making business changes," says Margaret Tahyar, a partner at Davis Polk & Wardwell, a New York law firm tracking Dodd-Frank for its clients. "In another sense, there's still a great deal of uncertainty."
As for the handful of rules that have been written, here is a closer look at the financial regulations that have been implemented and how they affect you.
A new consumer watchdog
The Dodd-Frank Act created a new federal agency to protect consumers who use a range of financial products. The agency is financed out of the federal budget. FinReg advocates hail that as an important development because the regulator won't be as beholden to the private sector as other agencies that rely on institutions they regulate for their budget.
On July 21, the Consumer Financial Protection Bureau received responsibility for enforcing laws meant to regulate consumer finance in the following areas:
What if you had to buy American?
This article was originally published by MSN Money on Thursday, May 12, 2011.
It might be supremely patriotic to stop purchasing imports, but the consequences for US consumers and the economy would be devastating.
By Katherine Reynolds Lewis
Legions of patriotic Americans look for "made in USA" stickers before buying products, out of a desire to support the country's economy.
But what if we all were restricted to purchasing only those goods that were made in America?
Our homes would be stripped virtually bare of telephones, televisions, toasters and other electronics, and many of our favorite foods and toys would be gone, too. Say goodbye to your coffee or tea, and forget about slicing bananas into your breakfast cereal -- all three would become prohibitively expensive if we relied on only Hawaii to grow tropical crops.
We'd have to trash our beloved Apple products because the iPod, iPad and MacBook aren't made in the U.S. Gasoline would double or triple in price, given that we now import more than 60% of our oil. And you couldn't propose to your true love with a diamond ring: There are no working diamond mines in the U.S.
Moreover, a complete end to imports would actually hurt the U.S. economy, because consumers and domestic companies would lose access to cheap goods. Trade protections, whether through tariffs or quotas, cost the economy roughly $2 for every $1 in additional profit for domestic producers, said Mark Perry, an economics professor at the University of Michigan-Flint and a visiting scholar at the American Enterprise Institute, a conservative think tank.
"If we restricted trade to just the 50 states, what would happen immediately -- and would increase over time -- would be a huge reduction in our standard of living, because we wouldn't have access to the cheap goods we get from other countries," Perry said. "We also wouldn't have any export markets, so companies like Caterpillar and Microsoft would have a huge reduction in sales and workforce." (Microsoft is the publisher of MSN Money.)
House Republicans' Latest Fight Against Derivatives Reform
This article was originally published by the Fiscal Times on Thursday, Dec. 16, 2010.
Two House Republican lawmakers want financial regulators to slow down new rules for derivatives trading to avoid the effects on big corporations.
By Katherine Reynolds Lewis
Two key Republican lawmakers urged financial regulators to slow down the progress of new rules for the nearly $500 trillion over-the-counter derivatives market, an early sign that the new Republican House majority aims to delay and scale back the landmark financial regulatory overhaul that President Obama signed into law in July.
"As our economy slowly recovers, we have serious concerns that the Dodd-Frank bill for Wall Street reform will force American companies, which did not cause nor contribute to the financial crisis, to move billions of dollars in capital onto the sidelines to comply with the law," Reps. Spencer Bachus, R.-Ala., and Frank Lucas, R.-Okla., wrote in a letter dated Thursday, Dec. 16, to the heads of the Treasury Department, Securities and Exchange Commission, Federal Reserve Board and Commodity Futures Trading Commission. The two are the incoming chairmen of the House Financial Services and Agriculture Committees, respectively.
The Republicans' strategy is to delay implementation of the Dodd-Frank legislation until 2012, in hopes that a new Republican president and Senate will roll back or repeal the law, said David Min, associate director for financial markets policy at the Center for American Progress.
"They're trying to run out the clock a little bit," Min said. "They will try to delay the process through hearings, through tough letters and proposed legislation, but ultimately the presidency is held by Obama and the Senate is held by Democrats."
Banks Lose with New Derivatives Controls
This article was originally published by the Fiscal Times on Thursday, Dec. 9, 2010.
The Commodity Futures Trading Commission is considering new rules that could move derivatives trading to an exchange or clearinghouse, which would have a big impact on the profits of Wall Street banks.
By Katherine Reynolds Lewis
Federal regulators next week are set to propose new rules for trading over-the-counter derivatives, part of an effort to bring the $450 trillion market under government control for the first time, and shifting the balance of power between centralized exchanges and the world's largest financial institutions.
Congress tasked the Commodity Futures Trading Commission with shedding light on the opaque derivatives markets and bringing the majority of market activity -- possibly 80 or 90 percent -- into clearinghouses and centralized trading facilities. At stake is which market participants will profit and the cost of the new rules. Derivatives, financial contracts whose value is based on the price of an underlying asset such as a commodity, interest rate or currency, have been wildly profitable for Wall Street in recent years. The five largest U.S. dealers reaped an estimated $28 billion in 2009, according to an analysis by Bloomberg News.
Greece Debt Concern Whipsaws U.S. Dollar
This article was originally published by the Fiscal Times on Friday, Feb. 19, 2010.
When European economies suffer turmoil, the dollar is considered the only safe haven
By Katherine Reynolds Lewis
As European policymakers scramble to resolve fiscal problems in Greece, the fast-changing news about the country's sovereign debt crisis has raised havoc on the value of the euro — and the dollar.
When the situation looked particularly grim, currency traders dumped euros and scooped up U.S. dollars. When things seemed to improve a little, traders bought euros and the U.S. currency weakened again, as was the case this week. Get used to this back and forth, experts say.
"Over the course of the year we're going to see phenomenal volatility," predicted TJ Marta, chief market strategist at Marta on the Markets, a research firm based in Scotch Plains, N.J.
But the ebbs and flows of markets can't obscure the underlying truth that while the United States is on a projected course of massive budget deficits for years to come, the dollar remains the reserve currency for the world. As much as Chinese and other investors may disapprove of U.S. fiscal policies, they don't have a lot of alternatives — either to dollars when it comes to a reserve currency or U.S. Treasury bonds when it comes to a safe investment.
