The Senate’s Wall Street Bill: What’s In It?

The Senate has passed a “financial reform” bill that will be reconciled with the House’s version and, presumably, enacted into law. It seems obvious that this exercise is driven by Congress’s need to “do something” about the financial crisis that began in September 2008. Whether this legislation bears any rational relationship to that crisis, or to the current doldrums on Wall Street, is another matter.
By the way, speaking of reform measures, have you heard much about Sarbanes-Oxley lately? Wasn’t that “reform” supposed to clean up Wall Street? To my knowledge, every expert in the field says that the net effects of Sarbanes-Oxley have been negative. Is there any reason to expect anything better from the current package? The author of Clean Government Now, himself a professional in the world of finance, took the trouble to read the Senate bill. He comments broadly on the bill, and then addresses some of its specifics, with more to come:

Like most of the New New Deal our crony-left leadership is selling, the new financial reform package is the perfect storm of ideological confusion, political blamesmanship, and outright ignorance. Reform? Not so much. …
This bill will make the Washington-Wall Street link even tighter. One of the great historical accidents that favored the American capital industry and our economy generally was that our financial center, New York, and other regional centers such as San Francisco, were separated from the envious, egotistical levers of coercive power in Washington. No more. This bill takes another step toward a continental European regime of capital at the control of political cronies. And it’s pretty clear how well (NOT) that system works. It also regurgitates the nausea-inducing spin that the financial crisis was the result of “wild speculation” and general bad-doings on Wall Street that victimized consumers, when in fact it was about $2T of fake AAA mortgage securities supported by shady insurance (a side show to Wall Street) and a government-sponsored secondary market via Fannie Mae and Freddie Mac. …
– Financial Stability Oversight Council: 9 Mandarins who will “identify risks” and sweep anything deemed “risky” under the Federal Reserve’s purview. Chaired by the Treasury Secretary, this new Council of Trent will have strange and surprising powers. Mind you, we now have a Treasury Secretary who gleefully admits he “has never held a real job”. But not to worry, this new “Office of Financial Research” will be staffed with “highly sophisticated economists, accountants, lawyers, supervisors , and other specialists” according to the Dodd release. What is missing? How about someone who has actually worked in the securities industry or in banking? … To a Washington bureaucrat, stepping outside in a drizzle is a risk. Risk and reward are tied together and that is what people in the actual world estimate every day … again, with consequences.
– Ending too Big to Fail Bailouts: Almost all the TARP money that went to banks was paid back. And most banks never wanted the money in the first place. Who was really bailed out? Fannie Mae and Freddie Mac. To the tune of hundreds of billions. Does this bill have anything to do with Fannie Mae and Freddie Mac? No. It has absolutely nothing to do with the entities that were actually bailed out. There are many dishonest provisions of the Financial Reform package, but the most dishonest one is the notion that it addresses in any way shape or form too big to fail. By getting Washington all that more in bed with Wall Street, you absolutely guarantee that too big to fail simply means: not connected enough to fail.