Thursday, May 20, 2010

Senate Passes Finance Regulation Bill

I know you don't come to this blog to get political news, so feel free to ignore this if you're not interested in the global economy. But I think the Senate did a very exciting thing today by passing sweeping financial regulation legislation. It still has to be reconciled with a House version of the bill, but in a few weeks, we could be having significant adult supervision once again of our financial transactions.

On this blog, I have occasionally dipped my toes into such areas, and I've been contemplating whether the world was waiting with baited breath for my comments on the European efforts to re-regulate financial instruments. (In brief: I think Germany has the right idea, though I'm not sure why they did the shock announcement on a ban on "naked short selling" -- which might sound weird, but when you hear the full explanation of what it is, you realize it's even weirder and you can't figure out why the hell it's legal in most places.)

So, I was taken aback this evening when I checked the news online and there was a big report about the Senate bill passage. I didn't know they would do it so quickly. But I'm very happy they did.

I'm no socialist. I'm certainly not anti-business. I have spent most of my professional life as a journalist covering commercial real estate finance markets, so I knew all about credit default swaps before you ever learned that they had caused your retirement savings to dwindle to nothing. But my view of successful market capitalism is much like German Chancellor Angela Merkel's and her finance minister, Wolfgang Schäuble's: The best option we have for making people's lives better, but it needs to be run transparently and orderly.

The Dow Jones has dropped hundreds of points the past couple days in response to the German actions (and, supposedly, if you read the financial press, because the markets are worried about "Greek contagion," but the same financial press a couple months ago was saying that the markets had already priced in the possibility of a Greek default on its debts, so who the heck is running the markets? Thirteen-year-old girls?). I wonder what they'll do tomorrow, Friday, in response to the U.S. Senate's actions. Granted, they have a better chance of buying off U.S. legislators than they do German Bundestag members. But they've got to understand that the foundation that's being laid is not anti-business, and once they understand the rules, they'll be better off -- as will be their customers.

Congratulations, Senators.
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