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U.S. Opinions: New York

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Rules for Wall Street

From an editorial in the New York Times on Tuesday:

President Barack Obama’s meeting Monday with several of the nation’s top financial regulators was designed, a spokesman said, to convey the urgency he feels about getting “regulations under Wall Street reform implemented promptly.” That sounds impressive, but the fact is that these reforms should have been in place a long time ago. The challenge at this late date is not simply to move faster – which could imply a slipshod effort – but to issue strong rules without further delay.

The Dodd-Frank financial reform law was passed more than three years ago. The latest tally of its progress by the law firm Davis Polk shows that of the 398 required rules under the law, 240 – 60 percent – have not yet been completed.

There are many reasons for delays, including relentless challenges by the banks and their allies in Congress – usually, but not always Republican – to proposals and regulations they oppose. The regulatory agencies are also chronically underfinanced. Another important reason has been a decided lack of urgency on the part of the administration to put the law fully into practice. Before Monday’s meeting, for example, the first and last such session Obama had with regulators was in mid-2011.

That said, a rush to complete rules is not, in itself, necessarily a good thing. Rules that are hurried through are likelier to be watered down, because the only way to avoid lengthy industry challenges is to make the rules too soft to draw Wall Street’s disapproval. So in addition to urging regulators to hurry up, Obama has to use his bully pulpit both to support regulators (and rules) who might anger Wall Street and tell congressional Democrats who would derail strong rules to back off.

Delays are especially acute at the Securities and Exchange Commission, which has completed about a third of the roughly 100 regulations it is required to issue under the Dodd-Frank law. It is behind in all major areas in its purview, including the regulation of asset-backed securities and credit-rating agencies. In two regulatory actions the agency has taken since Mary Jo White became chairwoman in April, on derivatives and investor protection, the rules have been exceedingly weak.

White has said she is committed to completing rules promptly, but her actions, so far, show the perils of moving quickly at the expense of truly strong rules.

Obama knows that Wall Street reform will be regarded as a failure if the rules don’t get done soon. But it will also be a failure if the rules, when completed, are too weak to make a difference.

U.S. Opinions offers views from a variety of newspapers. The views are not necessarily those of the Observer’s editorial board.
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