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Bob Moon: As we mentioned a moment ago, the G-20 summit ended today. World leaders of the biggest global economies agreed on various steps, all with the aim of improving economic stability. They were short on specifics, though. As with many of these international summits, the measures don’t come with a how-to. It’s up to each country to spell out their own way of getting there.
And commentator Michael Perino says reforms often fall flat because of who’s in power.
Michael Perino: On June 6, 1934, Franklin Roosevelt signed the Securities Exchange Act into law. The bill created the Securities and Exchange Commission, and for the first time, regulated the country’s stock markets. When he finished, the president handed one of the ceremonial pens to Ferdinand Pecora. His name might not ring any bells, but it should.
He led a gripping investigation of Wall Street wrongdoing; Pecora blazed the path for reform. But he knew its limitations. Roosevelt asked, “Ferd, what kind of law will it be?” Pecora responded, “It will be a good or a bad bill depending upon the men who administer it.” He might well have added, “Let’s see how the midterms go.”
The parallels between the Exchange Act and the recently passed Dodd-Frank Law couldn’t be clearer. Then as now, there was a popular outcry to rein in the freewheeling banking industry. Both times, financiers pulled out all stops to defeat reform. Both times, Congress punted on many of the hardest questions.
The main difference lies in the election outcomes. The Democratic victory in 1934 was a resounding vote of approval for the New Deal. The new agency wrote a strong and fair set of regulations. It was a vigilant cop on the beat until declining resources and indifferent administrations sapped its strength.
Today, popular outrage over Wall Street excesses remains high, yet resurgent Republicans have vowed to put Dodd-Frank and the new regulations implementing it “under the microscope.” The rhetoric is all about fostering economic recovery and making America’s banks globally competitive, but the real goal seems to be eviscerating reform before it’s had a chance to succeed. Republican control of the House will likely mean shrinking budgets for financial regulators. They simply may not have enough resources to adequately police the marketplace.
Pecora wouldn’t be surprised. Just a few years after his path-breaking investigation, he warned that if we didn’t maintain our vigilance Wall Street might be easy to regulate but hard to control.
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