My quick spin on Obama’s financial reform plan

June 17, 2009

After perusing the 85-page draft,  a few brief thoughts come to mind, though more later:

1) This plan has got to be a great disappointment for those who want to “break up the banks” or put in place limits on their size and scope.

2) Following on my first point, the plan really does nothing about the supposed “too big too fail” problem. In fact, it enshrines the concept by making the Fed the watchdog over these firms. Rather, the reforms try and make sure that TBTF firms don’t get in trouble to begin with. But there is a huge moral hazard issue in place that has not gone away.

3) I think it is unlikely that these reforms get passed this year, what with the SC nomination and healthcare and climate change to deal with — all of which are more important to Obama and his legacy than financial reform.

4) Also enshrined: the Community Reinvestment Act. Great.

5) It is interesting that the Bernanke and Bair are talking about financial literacy today since this plan assumes financial literacy is an impossibility, thus it advocates the creation of a consumer safety commission for financial products.

6) And as I have written before, giving the Fed more regulatory influence inherently makes it a more political institution. Better to have it focus on monetary policy. This is going to be  BIG issue for Congress.

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HVCC—new legislation for appraisals. hopefully it will be repealed. i have a qualified buyer wanting to buy dream home on the lake and the property was appraised incorrectly. The appraiser used values of homes not on the lake, under devaluating the property by $90K. With this new legislation the appraiser cannot have any communication with anyone but the lender.
Meanwhile my couple have sold their home and there are no other properties that are comparable in the area.

Posted by Maria Seay | Report as abusive