WASHINGTON, DC – Financial reform in the United States and worldwide hangs in the balance. The problems that brought us the terrible crisis of 2007-08 have not been fixed. Some underlying weaknesses are actually worse than they were a decade ago, including the problem of “too big to fail” global megabanks.
Europe is backtracking on financial reform issues; its policymakers are too preoccupied with holding the eurozone together. In the US, there will be no new legislation under the current Congress – and probably not for a long while to come. The Dodd-Frank Act of 2010 may turn out to be a framework for effective regulation, or it might become another set of empty promises. So far, implementation has been slow.
Implementation depends on regulators – some of whom are very good, while others remain in thrall to the big Wall Street banks. The issues are detailed and technical, and the financial lobby has deployed a small army of highly paid experts on a mission of delay, dilution, and diversion. The process is still subject to political supervision, but many politicians are easily bamboozled when the conversation really gets into the weeds.
This is why newly elected Senator Elizabeth Warren of Massachusetts is already proving so effective. Warren has worked hard on financial-sector issues over many years. She had the key ideas that led to the creation of the Consumer Financial Protection Bureau, and she helped get that agency on its feet. But she has also been engaged with all of the other practical details of financial reform for as long as anyone – in part due to her experience as chair of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP).