So that’s why we need financial reform.
That’s what some have said in response to the kinds of abuses I mentioned yesterday. Surely municipalities need protection against the depredations of financial shysters.
Only, it’s already illegal to hold sham auctions and collude. New regulations wouldn’t change a thing. That may be why the biggest banks are all getting behind the proposed financial reform legislation. Surely with the Senator from Fannie Mae—Chris Dodd—leading the charge, the big banks have nothing to fear.
Seriously, Congress is in the business of getting reelected every two years. The last time we looked at serious reform in the ‘90s—privatizing the agencies, raising capital requirements—the big banks got everything they wanted: new markets, relaxed capital requirement, and new barriers to competitors. And a lot of Congressmen got VIP mortgages and special loans to constituents.
Adam Smith noted that when business-people get together, the conversation usually ends in a conspiracy against their own customers. Add legislators into the mix, and you get a witches brew of self-interest and regulatory power. But you don’t have to put up with it. Just talk to your neighborhood banker.
Douglas R. Tengdin, CFA
Chief Investment Officer
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