June 18, 2009
I heartily commend President Obama and his financial market team in their decision to meet the needs of the American consumers in providing a resolute plan to overhaul the current system. This is indeed a “New Foundation,” a sweeping financial reform the likes of which we have not seen since the aftermath of the Great Depression. And we certainly need it now. Now, in 2009, this is truly a "year that answers”--some years pose questions, some years provide answers, and in this critical hour, our President has provided a substantive path to answer the critical economic problems our country is facing.
Specifically, the Administration's plan calls for regulation into the area of over-the-counter (OTC) derivatives, requiring exchange trading for standardized OTC products, requiring mandatory clearing in opaque markets such as credit default swaps (CDSs) and OTC transactions, increasing capital requirements, increasing cooperation and coordination between financial market regulators, and increasing consumer protection from deceptive practices. It also calls for increasing funding to provide for enhanced technology and human capital so that we can properly carry out our responsibilities. The proposal not only provides answers, but sends the difficult to digest message that we all--and by “all” I mean the American public, the banks, the firms, the regulators--have a lot to answer for.
It is a good proposal. At the same time, it is good to take a critical look at how we came to this point of financial meltdown and admit that we could have, that we should have, done better. That being said, we need to acknowledge that it is the right time to reform ourselves and our infrastructure, and prioritize accountability, cooperation, consistent regulatory practices, transparency and systemic and sector-based risk assessment.
I understand that there are more than a dozen hearings currently scheduled on this issue, and we face a summer of Congressional debates on the various merits of this proposal. My concern is that, "by a thousand tiny cuts," this important reform will languish in committees and backroom debates. It is simply too important for that to happen, and we need action. There are things that the CFTC can and should do now, and we have excellent leadership at the helm to guide us in taking on these important tasks. There are, however, issues that will require Congressional action, and it is my hope that various constituencies can see beyond their individual narrow agendas, and work toward the greater good to get legislation passed on these important issues, as the President intends, by the end of the year.
Last Updated: June 10, 2010