Watering Down FinReg: Corrupt or Merely Misguided?

“We don’t want them to regulate capriciously, arbitrarily, without engaging in a cost-benefit analysis.”

– Representative Jeb Hensarling, a Texas Republican


The statement above is representative of a misguided economic cost/benefits analysis that was dominant during the three decades incorporating 1980s-2000s. Its fatal flaw is that it fails to include the expenses and impact of high cost events — like the 2007 recession, 2008 credit crisis, and 2009 market collapse. It is, in effect, a mathematical cheat — one that ignores probabilities with extremely expensive outcomes.

And who is pushing the ignore-the-risk cost/benefit analysis? Who stands to benefit from defanging Dodd-Frank? Look no further than Goldman Sachs, JPMorgan Chase & Co., and Bank of America Corp.

Here’s Bloomberg:

“Republicans will try to rein in regulators implementing a sweeping overhaul of financial rules and press for a smaller federal role in the mortgage market as they return to a majority in the House of Representatives and a stronger minority in the Senate.

Taking control of the House and bolstering their position in the Senate will increase Republicans’ sway over the direction and independence of the Consumer Financial Protection Bureau and over any technical fixes Congress makes in rules governing the trading of derivatives. Networks projected that Republicans won the seats needed to claim a majority of the House.

Republicans say they will use the House Financial Services Committee to ensure that regulators such as the Commodity Futures Trading Commission and the new consumer protection bureau do not write rules that lawmakers consider too restrictive on the banking industry.”

I have never been able to tell if the corporate apologists on the right are bought and paid for supplicants to big banks and investment houses — or if they are merely ideological sycophants unable to perform any form of analysis on their own. Its likely a little of each.


Firms That Fought Dodd-Frank May Profit Under Republican House
Clea Benson and Phil Mattingly
Bloomberg, Nov. 3 2010

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