http://online.wsj.com/article/SB10001424052748704853404575322491510468572.html As a lifelong Democrat and public servant to four presidents, I had hoped the financial reform bill would be the best example of my party's long-standing reputation for standing on the side of individual investors. It's not. The bill, already weakened by deal-making as it emerged from the Senate, has been bled dry of... [more]
http://online.wsj.com/article/SB10001424052748704853404575322491510468572.html
As a lifelong Democrat and public servant to four presidents, I had hoped the financial reform bill would be the best example of my party's long-standing reputation for standing on the side of individual investors.
It's not. The bill, already weakened by deal-making as it emerged from the Senate, has been bled dry of nearly every meaningful protection of investors.
Ironically, the authors of this bill are the same Democrats who normally would have opposed many of its features if they were in the minority. Now in the majority, these politicians are investor advocates in their press releases alone.
First, Democratic leaders in Congress failed to revoke the 1975 law that prevents municipal bond issuers from facing the kind of regulation and scrutiny of the corporate bond market. If the municipal bond market melts down in the next few years, we'll know who to blame.
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BEATEN BACK BUT SPONSORED BY TREASURY/WHITE HOUSE AND WOULD HAVE
HELPED OBAMA WITH FUNDRAISING IN THE NEXT ELECTION
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Second, they failed to pass a meaningful majority-vote or proxy access rule for corporate ballots. Instead, thanks to Sen. Chris Dodd (D., Conn.), the Senate passed a proxy access rule that is comically useless: You need 5% of shares to get on the proxy. Very rarely do investors assemble such large stakes in any company
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Third, New York Sen. Chuck Schumer's wise idea to let the Securities and Exchange Commission (SEC) become a self-funded agency will likely be killed by appropriators who are unwilling to give up the power of the purse.
Fourth, Democratic leaders left in place the confusing dual regulatory structure of the SEC and the Commodity Futures Trading Commission. A merger was necessary to eliminate regulatory arbitrage and corrosive bureaucratic turf battles, yet it didn't happen.
Fifth, Senate Democrats failed to support Rep. Barney Frank's (D., Mass.) effort to pass a new law to overcome the legal precedent of the 2008 Supreme Court's Stoneridge decision, which allows third-party consultants, accountants and other abettors of fraud to avoid liability. Again, another sellout of investor interests.
Sixth, Congress didn't deal with the massive problems of Fannie Mae and Freddie Mac. It's one thing to fail to see trouble before it happens. Now, there's no excuse. The central role played by these two organizations in the financial crisis is indisputable. Congress had a chance to fully restrict these agencies from anything but the most basic market-making activities, and it didn't.
Finally, Democrats could have proposed a law obligating investment advisers to serve their clients' interests above all others. That was in the House version of the bill, but the Senate punted the idea, and it's is likely to end up kicked down the road even further.
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