The 800 LB Gorilla in the Financial Reform Bill
The lackluster Republican opposition to Senator Dodd’s Financial Reform bill is focused on whether or not the Democratic proposal allows for or prohibits additional bailouts. A secondary hot topic is the supposed derivative limitations. Frankly, these are both red herrings. They serve to mask an even larger danger that no one is talking about: a huge new government agency that will control all financial institutions in the US—and not just the "too big to fail" ones. It’s called the Financial Institutions Regulatory Administration (FIRA), and its authority absorbs and supersedes every other banking, thrift and stock market regulatory agency including the SEC—though it technically doesn’t actually eliminate any agency (as we might expect of government).
Shannon Croll tells us the establishment excuse given for the new regulation scheme: "The Financial Institution Regulatory Administration proposes that a single U.S. bank regulator would combine parts of the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. Since regulatory supervisory duties are split between four independent agencies this allowed for Banks to shop for the supervisor of their choice; certain regulatory agencies have been known to be easier in the examination process than others."
While that may be true, this new proposal does much more that is dangerous and doesn’t even close that minor loophole—since insiders from the big banks will always control FIRA and secretly grant exceptions to their friends. The language in this bill is so general as to give FIRA virtually unlimited powers to expand into any area of regulation and control. The record keeping requirements it can mandate will make the IRS look benign. And, because this bill contains no specific limiting criteria, this agency will still be able to do almost anything with total discretion—including covering for the financial evils of the insider banks that brought on the financial crisis of 2008, just as the SEC did before. This is a con job folks and is just as big a leap into socialism as the Health Care reform bill was to medical freedom. The Republicans, as usual, are utterly failing to oppose it properly.
The closest thing I can come to describing the scope of this mega-agency (which could easily absorb all of the $50B premiums taken from the largest banks just for administrative costs) is to compare it to the creation of the huge umbrella agency over national security in the USA —The Department of Homeland Security. It’s just that big in both scope, cost, politicization, and potential bureaucratic inefficiency.