The right financial reforms

By Bart Chilton

The financial regulatory reform bill recently approved by Congress and signed by President Obama contains 16 titles and 2,315 pages. Some suggest it's too large and complex.

But remember when financial officials asked Congress for bailouts two years ago? After it was passed by Congress and signed by President George W. Bush, the Troubled Assets Relief Program authorized $700 billion in bailouts. And it was only three pages long.

That skimpy document allowed U.S. funds to be funneled to non-U.S. entities. It allowed CEOs to rake in millions even as their companies received assistance.

The point is that size may matter, but quality and content are critical. The new reform bill has both.

One reason this legislation is so detailed is that it touches everything in our economy. Bank boardrooms, heartland homeowners, and everything in between will be affected.

That's good, because we have witnessed massive deregulation of markets and our economy since 1999. Bankers moved away from banking and into exotic mortgages and bets that some of those mortgages would fail. Speculators used equity and futures markets as their private jungle gyms.

That status quo was unacceptable. That now changes.

A friend joked that the new law would make regulators like dogs chasing cars. What would happen if they ever caught one?

Well, while large and complex, the law actually sets a pretty good road map for regulators. It gives us the transparency, tools, and teeth we need to better regulate markets and ensure we won't again face massive bailouts. It sets us on a straight and strong course for more efficient and effective markets, devoid of fraud, abuse, and manipulation.

For example, the currently unregulated over-the-counter markets (dark markets, some say), where hundreds of trillions of dollars in trading occurs out of regulators' view, will have a bright light cast upon them. The largest traders in commodity markets (markets that affect prices of just about everything people purchase, from car loans to a gallon of gas, orange juice, or milk) will now be limited in the amount of concentration they may hold in a given market.

This can't help but prevent unsubstantiated price run-ups like those we saw at the height of the economic calamity, with gasoline at $4 a gallon and oil at $147 a barrel.

The bill also provides disruptive-trading-practice authority, so regulators can go after bad actors in markets before they cost consumers.

Finally, there will be a consumer-protection entity. For too long, the interests of consumers have been on the back burner. That now changes.

What do we do if we catch the car? Load it up with all the options and move down the road. We're going somewhere that will be good for markets, for the economic engine of our democracy, and for consumers.