Financial Regulation: The Week That Was

In his inaugural address, President Obama said we should set aside childish things. So this is going to be a very grown-up blog. I’ve noticed that grown-up blogs often provide weekly wrap-ups, so I'm giving it a whirl. At least for this week.

Because this blog is about about financial regulation, not the economy, I’ll leave it to Warren Buffett to remind us what a bummer of a week it was. But despite the doom, gloom, and those awful results on American Idol, the big regulatory do-over chugged along in Little Engine That Could fashion. Lots to report:

Bernanke Finds an Exit Strategy
The biggest event last week, of course, was the honor bestowed on Fed Chairman Bernanke in his hometown of Dillon, South Carolina. They put his name on a sign at Exit 190 on Interstate 95. I kid you not; you can read his gracious acceptance speech on the Fed website.

Sorry, that had nothing to do with financial regulation. My last bit of childish fun.

Oops, We’ll Try Not to Do It Again
The SEC announced two do-overs in the works: First, on April 15 they’re gonna hold a roundtable on their oversight of credit rating agencies. Second, they’re going to change the way they deal with “whistleblowers” and “enforcement tips.” And FINRA is tagging along, establishing a new “office of the whistleblower.”

Frankly Speaking
House Financial Services Committee Chair Barney Frank held a press conference to discuss his regulatory plans, nicely summarized here by Reuters. Frank has scheduled four hearings in March alone, focused mostly on creating a “strongly-empowered” systemic risk regulator. Frank had lots (and lots) to say about what went wrong, who messed up and how he’s gonna fix it; more on that here at TBDO later this week.

Systemic Kowtowing
It's a safe bet that we'll soon have a systemic risk regulator. This prize job will ego ither to a shiny new entitity or (safer bet) the less shiny institution currently chaired by Ben "Exit 190" Bernanke. Major industry groups, including the Financial Services Roundtable and SIFMA, now say they're OK with a systemic risk regulator, though some like the Fed in the role and some don't. Check out the hearing in the capital markets subcommittee of Mr. Frank's committee, headed by Paul Kanjorski (D-PA).

March On
Spencer Bachus of Alabama, the ranking Republican on Frank’s committee, spoke to a bankers' group about the regulatory timetable. Looks like Congress will be almost as busy this month as a certain young woman with 14 children. By the G-20 summit in early April, Bachus said, Congress wants to agree on the basic guidelines for regulatory reform so the President can wave them around in London, and also hopes to propose legislation creating a systemic risk regulator. But when it comes to a comprehensive bill on financial regulation, we’re talking...August. (Reuters story here.)

The Toaster Principle
Congressman Chuck Schumer (D-NY) announced that he and Dick Durbin (D-IL) will introduce a bill next week to create a Financial Product Safety Commission. Credit for this idea goes to Harvard Law Professor Elizabeth Warren (who now heads the Congressional Oversight Board for the TARP). Ms. Warren likes to point out that we have a Consumer Products Safety Commission to protect us from exploding toasters, yet mortgages can explode whenever they feel like it. She argues that this is unfair to consumers of financial products (and, I might add, to toasters).

Mary, Mary, Sometimes Quite Contrary
The Guardian reported that “Britain and America are heading for an embarrassing showdown at next month's G20 financial summit in London as Mary Schapiro signalled she will abandon efforts to seek a convergence of financial regulation between the US and Europe.” An unnamed European regulator pronounced this “sad.”

Study Hall
Better get used to seeing links to lots of studies and reports on this blog. It's the nature of the beast; there's nothing bureaucrats and advocacy groups love more than scholarly-sounding white papers filled with policy recommendations. Read them, or not; there’ll be no quizzes. Here are two that got dumped on my doorstep this week;

- Regulatory Reform Proposal from the Financial Services Roundtable, an industry group.

- Recommendations to Enhance Commodity Futures Markets Oversight, from IOSCO (the International Organization of Securities Commissions).

I'm very sorry, President Obama, but now that this is done I'm going to pour myself a bowl of Count Chocula and watch Cartoon Network.

Note: Because I'm embracing the President's new era of responsibility, I updated this post Tuesday to add something I'd missed.

Image: videojug.com