Congress misses the point of reform

Bromley illustration

More than a year after the US financial emergency went critical and threatened the global economy with its worst reverse since the 1930s, the underlying causes have yet to be addressed. When it comes to improving financial regulation, the crux of the matter, there has been a lot of talk – usually about the wrong things – and next to no action.

Last week, a committee of the House of Representatives, which has been co-operating with the Obama administration on this front, released a draft bill. It has some good ideas, such as creating an early resolution regime for non-bank financial institutions. It has some crazy ideas, such as aiming to keep secret a list of institutions subject to special oversight. Above all, it has plenty of material to get Congress riled up – especially the proposals to enlarge the supervisory role of the Federal Reserve.

Nothing matters to Capitol Hill so much as apportioning responsibilities and the power that goes with them. But who makes the rules is less important than what the rules say. Here the bill mostly opts out, granting discretion to regulators left and right. On issues of substance as opposed to form, it is vague to the point of silence.

The remainder of this article can be read here. Please post comments below.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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