07.06.10

Financial Reform Bill calls for 68 Studies

Posted in Financial Markets, Politics and Policy at 8:15 pm

Wall St reform calls for 68 new studies

Instead of toughening up ethical and marketing standards for financial planners, Congress studies the issue in the financial overhaul bill. Instead of making it easier to sue lawyers, accountants and bankers who help commit securities fraud, Congress studies the issue.

The bill also studies, among other things: short selling, reverse mortgages, improved insurance regulation, private student loans, oversight of carbon markets and the “feasibility of requiring use of standardized algorithmic descriptions for financial derivatives.”

By way of comparison, the health care legislation only called for 40 studies.

The article goes on to state that most of the studies were the result of compromises – one side wanted to implement some new policy, the other side opposed it entirely, and the negotiated compromise was to conduct a study of the issue instead.

The nature of the studies and their followup also varies widely by issue:

Some studies are worse than others, congressional watchers say. Studies that don’t require any follow-up or deadlines can be dead ends.

A multi-agency study to combat mortgage foreclosure scams has no deadline nor follow-up rules. A study on executive compensation consultants and another on financial literacy among investors must meet deadlines, but doesn’t require Congress or regulators to act on the findings.

Much more useful is a study on financial firms’ hedge funds and trades made on banks’ own accounts. That study has a deadline and is followed up with mandates: regulators must limit so-called proprietary trades and bank ownership of hedge funds.

As noted in a previous post, the only saving grace is the hope that this reform legislation, assuming it passes, represents just the first in a series of ongoing legislation.

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