Ex-SEC Chairman, SLAMS Financial Reform Bill

[TampaYankee]

Arthur Levitt, Ex-SEC Chairman, SLAMS Financial Reform Bill

The Huffington Post | William Alden First Posted: 10-20-10 09:10 AM | Updated: 10-20-10 09:14 AM

Congress "ducked" on financial regulation, neglecting to solve the problems that caused the financial crisis, former SEC chairman Arthur Levitt said.

In an interview with the Street, Levitt, who now serves as a Goldman Sachs adviser, said the Dodd-Frank financial legislation, passed in July, accomplishes very little. It has left the regulatory bodies unfocused and ineffective, and it has failed to determine specific regulatory policy, he said.

"What Congress did, in effect, was they highlighted a battery of issues and then turned it over to the regulators," Levitt said. "Its efforts at preventing 'too big to fail' and systemic risk, I think, were ill-advised."

According to the Street interviewer, Levitt called the Dodd-Frank reform an "irrational mess" last week at the Loan Syndications and Trading Association conference.

A real problem, Levitt said in the interview, is that regulatory powers are shared by a variety of agencies, allowing for dangerous inefficiency. Creating a "council of regulators" was "the wrong solution," "almost by definition," he said, referring to "turf battles" that will distract the regulatory bodies, which include the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the new Consumer Financial Protection Bureau.

"With the different balances of power ... [regulators] are bound not to be terribly effective and responsive, at a period when timing becomes of critical importance," Levitt said. "Streamlining certainly should have been done."

The SEC and CFTC, for instance, should have been merged, he said.

"Because of politics involved, they [Congress] simply ducked on that issue," he added. "The lobbying that had been focused on the Congress up until now is going to be focused on the CFTC, and the FDIC and the SEC and the new bureaucracy created by the consumer-protecting agency."

See original article for interview video:

http://www.huffingtonpost.com/2010/10/20/arthur-levitt-sec-reform_n_769396.html

[TampaYankee]

IMO this fellow is right on. Rather than restrict financial institutions to a manageable size that could be permitted to fail, Obama and the Congress allowed them to remain dangerously large and placed all fail-safes in the hands of the regulators which is where the system failed before. While there may be more regulations it still requires regulators to police the system. People can fail, regulatory zeal changes with political appointments. Many regulators look to get jobs in the industry they are supposed to be policing. This system requires proactive enforcement.

We needed more passive protections like downsizing institutions and placing boundaries on the types of activities a single bank can engage in. Put simply, the architecture of our financial system remains inherently risky.

Fianancial Reform did contain some positive things like the Comsumer Protection Agency and some limitations on derviatives. However, overall it is rather weak and remains risky. It is disturbing that Obama is proud and comfortable with what was passed. Summers and Geitner lead him down the garden path of more of the same Rubin policy with some window dressing and little more than street crossing guards to police the system. If left as is then the system will be abused and fail again. It's just a matter of time.

[lookin]

Worth noting that this guy joined Robert Rubin and Alan Greenspan in running Brooksley Born out of Washington twelve years ago when, as head of the CFTC, she proposed regulating the derivatives market. Had her advice been followed, the 2008 meltdown could likely have been avoided.

At the time, Levitt insisted that the capital markets could be trusted to regulate themselves, and succeeded in gutting her agency. Now he wants to see what's left of it get merged into the SEC.

Probably easier for Goldman Sachs to keep an eye on it.

[TampaYankee]

Worth noting that this guy joined Robert Rubin and Alan Greenspan in running Brooksley Born out of Washington twelve years ago when, as head of the CFTC, she proposed regulating the derivatives market. Had her advice been followed, the 2008 meltdown could likely have been avoided.

At the time, Levitt insisted that the capital markets could be trusted to regulate themselves, and succeeded in gutting her agency. Now he wants to see what's left of it get merged into the SEC.

Probably easier for Goldman Sachs to keep an eye on it.

I used to be a card-carrying capitalist.I had stocks and bonds. I watched CNBC, Mad Money and Cavuto and his ilk, monitoring the market. I dont watch any of them anymore. It is a big scam with the big guys scamming the little guys and fat cats looking to stuff their already obscene coffers with more ill-begotten obscene profits.

I still have stocks and bonds. I cannot unload them by contractual obligation. Where would I put the money if I did?

I'm still a capitalist but not so zealous. I dont trust shills which means just about every talking head in the business world, Suze Orman excluded. I believe in small business. I believe in manufacturing like Ford and GM. I believe in making a fair profit by making and selling something of value or providing a valuable service at a fair price.

I do not believe in business that gets by on cons or makes it's money on blatant gambling with high risk rollers using the money of others. I dont believe in business that makes its money through tax write-offs by moving jobs offshore.

Just call me an old-fashioned capitalist.

[lookin]

These are not your father's markets, dominated as they are by algorithmic trading and opaque financial 'instruments' that would make a robber baron blush.

I'm coming to the conclusion that these markets are beyond the small investor's understanding and the government's ability to regulate. I wouldn't outlaw them, if that were even possible, but I would try to find a way to completely wall them off from the legitimate raising of capital for the creation of tangible products and jobs.

And I'd do it quickly. A major chunk of our economy is buzzing around inside these giant high-speed computerized networks which I believe are fully understood by no one, and certainly not by the government or its citizens. I believe it is only a matter of time before a cyberterrorist gets inside and swings an electronic pickaxe around, just to see where the pieces fall.

In the meantime, I'm keeping what little I have left as far away from Wall Street as I can get it.

[Lucky]

"In the meantime, I'm keeping what little I have left as far away from Wall Street as I can get it."

Humboldt County, no doubt!