Remember the tale of six
blind men who were asked to describe an elephant so each grabbed hold of a piece
of the beast. The man who took hold of
the tail described the elephant as a rope, the one who touched the leg said it
was a pillar, and the one who felt the trunk said the elephant must look like a
Pretty much the same thing
happened when Senator Christopher Dodd released his proposed bill to Restore
American Financial Stability. While some of the people who might be expected to
react such as The U.S. Chamber of Commerce and the New York Stock Exchange have
thus far been silent, a lot of individuals and groups have grabbed the piece of
it that they care about and are either praising the bill - or bashing the hell
out of it.
Post columnist Steven Pearlstein
in an interview on MSNBC yesterday called the bill "one of the silliest
compromises I've seen in Washington in a long time." He said that the bill's requirement that the
Federal Reserve regulate the largest banks and only the largest banks hangs a
sign over those bank's doors saying "too big to fail." He also faulted the number of loopholes
exempting various types of derivatives from the law's requirements.
Mortgage Bankers Association focused on the bill's efforts to modernize the
regulatory structure for mortgage banking firms. In a press release that almost beat Dodd's
bill into the hands of the press, Robert E. Story, Jr. CMB, Chairman of the
association said that MBA was "concerned that this bill could be headed
down several of the same wrong paths as the legislation that moved through the
House late last year." He said that
the bill "does not provide uniform national regulation of all mortgage
banking firms, and thus further solidifies the patchwork of state and local
laws that increase costs for borrowers and lenders alike."
the bill for moving away from the "one size fits all" approach to
risk retention" by recognizing that some underwriting requirements, loan
types, and business models are inherently low risk but said that the bill
should provide explicit exemptions for qualified loans that exhibit certain low
risk characteristics from bill's provision that the underwriter retain a
portion of those loans on its books in a risk sharing arrangement. He singled out, in particular, commercial real
estate loans and residential loans meeting conventional underwriting
The American Bankers
Association (ABA) said it opposes the new bill as it now stands and "is
suggesting a number of areas that
need to be changed: including the
approach to consumer protection, which continues to separate prudential and
consumer regulation; the elimination of the thrift charter; the elimination of
the Federal Reserve's authority over state member banks; issues within the
resolution mechanism; the weakening of federal preemption; and the failure to
address accounting issues in any fashion.
"We oppose this bill because it will subject traditional banks, which did
not cause this crisis, to heavy new regulation, while non-banks will have even
further competitive advantage," said Edward L. Yingling, ABA's president and
chief executive officer. "The future of
traditional banks will be unnecessarily put at risk and their ability to
provide the credit our economy needs will be undermined. Progress has
been made, there is still an opportunity to achieve regulatory reform, and ABA
will support the continuing efforts of Chairman Dodd and the rest of the Senate
Banking Committee to reach agreement on a workable bill."
Council of Institutional Investors, a nonprofit
association of public, union and corporate pension funds, applauded the bill's
efforts to "address the serious failures by corporate boards that
contribute to the financial crisis.
The Council said, it was pleased at
the corporate governance provisions requiring directors of public companies to
be elected by a majority vote of shareholders and reaffirms the Security and
Exchange Commission's (SEC) authority to issue "proxy access" rules
that would make it easier for investors to nominate board candidates.
Council also expressed satisfaction with provisions to strengthen the
regulation of credit rating agencies, trading in over-the-counter derivatives,
and improve the resources and independence of the SEC.
Republicans immediately criticized
the process leading to creation of the bill. Senator Dodd had been working as a
committee of two with Bob Corker, (R-TN), a member of the Senate Banking
Committee to craft the bill, but recently had gone off on his own to finish the
process. The Wall Street Journal quoted Corker as saying that, while he was
disappointed that bipartisan efforts had reached an impasse he would continue
work toward a bipartisan bill. He said,
however, that he would not support any bill that included an independent,
standalone Consumer Financial Protection Agency.
David Vitter (R., La.), another member of the committee said, "I think Dodd's been pulled
back by the White House and pushed to take a pure partisan bill." He also called the Consumer Financial
Protection agency "a complete nonstarter," one that no Republicans on
the committee would support.
Harvard Law professor Elizabeth
Warren, chairperson of the Congressional Oversight Panel that oversees the
Troubled Asset Relief Program (TARP) has become the public face of advocacy for
consumer financial protection. She expressed
support for the bill and criticized the banking communities' "ferocious
lobbying for business as usual."
She said that Senator Dodd had taken a important step by advancing new
laws to prevent the next banking crises and that the upcoming series of votes
will make the choice clear, "families or banks."
Treasury Secretary Timothy Geithner said in a press release, "This is a
strong bill. We hope the Committee and the Senate will move forward quickly to
pass comprehensive reform. We need a strong, independent consumer financial
protection agency that is accountable for setting and enforcing clear rules
across the financial marketplace. And we need strong authority to
limit risk-taking and protect the taxpayer. Enacting reform will help
reduce uncertainty about the rules of the road going forward. Passing
strong reforms here at home will also give us the ability to put in place a
level playing field internationally, with high standards. As the
President said, as the bill moves forward, we will take every opportunity to
work with Chairman Dodd and his colleagues to strengthen the bill and will
fight against efforts to weaken it."
So a Wiseman said to all of
the blind men, their hands still all over the elephant, "All of you are
right. The reason every one of you is telling it differently is because each
one of you touched the different part of the elephant."
Or maybe this is a
different tale - one that ends with the moral "it all depends on whose ox
HERE is a recap of the bill