07/18/2009 05:12 am ET | Updated May 25, 2011

Wall Street Regulatory Overhaul: A Guide To The News

We here at the Huffington Post are going to do our best to guide our readers through President Barack Obama's proposed regulatory overhaul, which he announced yesterday.

For the full video of the speech and the details of Obama's new reforms, see our story.

Check back here for regular UPDATES:

UPDATED: June 18, 4:28 p.m.

The Wall Street Journal's Washington Wire has an excellent summary of the Obama plan. If you're into bullet points, you'll love it.

Count former Secretary of Labor Robert Reich among the ranks of pundits who think Obama's plan doesn't measure up. Reich gets the prize for most colorful language describing otherwise dry financial reform plans. He calls it, "a mere filigree of reform, a sheer gossamer of government." Here's more from Reich:

"The plan doesn't stop stop bankers from making huge, risky bets with other peoples' money. It does increase capital requirements and oversight, but it doesn't require bankers to take their pay in long-term stock options or warrants, and it doesn't even hint that banks should go back to being partnerships instead of publicly-held corporations."

Kevin Drum at Mother Jones is discouraged by the plan's control of leverage. So, too, is George Soros, whose three principles for financial reform appeared earlier this week in the Financial Times. Other key prinicples from Soros: Reining in risk, and getting regulators -- especially, Alan Greenspan-- to accept their culpability in creating the financial crisis.

Even some in the financial industry were critical of Obama's reforms. Jim Chanos, the billionaire hedge fund manager, appeared on CNBC this morning, and was concerned that Obama's plan didn't go far enough. (In fact, he likened the plan to a "Maginot line.") Chanos said he's concerned the Obama plan is "moving the deck chairs around a little bit, but not getting at some of the activities that caused the problem."


New York Times columnist Joe Nocera wants people to stop with the Roosevelt comparisons. Obama's plan, Nocera says, is "not even close to what Roosevelt accomplished during the Great Depression." What the plan does do is the real story, Nocera says. For one, the Obama plan seems to accept the fact that banks should be allowed to become "too big to fail." Here's Nocera's summary:

"Everywhere you look in the plan, you see the same thing: additional regulation on the margin, but nothing that amounts to a true overhaul. The new bank supervisor, for instance, is really nothing more than two smaller agencies combined into one. The plans calls for new regulations aimed at the ratings agencies, but offers nothing that would suggest radical revamping."

Simon Johnson's got that we should keep in mind as we hear the President speak. Among his queries are whether Obama sees the financial crisis as a "rare accident" or a systemic problem. He also wonders whether Obama will make clear whether he is aware of the true damage that bankers have wrought on the economy? "For example as seen in the increase in our national debt that arises directly from their malfeasance--from around 40% of GDP to 70% (administration estimate) or 75% (IMF yesterday) or above 80% (my view)."

New York Times' Dealbook blog points to a wish list compiled by analysts at RBC Capital Markets of regulations that Obama should include in the plan, but hasn't. Among them are "Significant Pay Increases to Attract Top Talent to Regulatory Agencies;" and "Stiff Penalties for Politicians and Political Action Groups That Pressure Financial Companies."

Felix Salmon attempted to pull apart the 85-page white paper that has been circulated, and tell us what is really important. But, he's thoroughly confused. As he puts it, "FOSC = NBS + FDIC + NCUA + SEC + CFTC + FHFA + FOMC + CFPA + Treasury.... I know what you're thinking -- it can't possibly be as simple as that." And it's not. He proceeds to try and disentangle the difference between federally-chartered banks, state-chartered banks, and credit unions, and other things that make my eyes water.

At Credit Writedowns, Edward Harrison's initial reaction to Obama's plan is largely positive. Harrison takes a look at Obama's five main points, and suggests that Obama's reforms must end "the balkinaziation of regulators." Harrison writes:

"..the concentration of power lies with the Treasury and the Federal Reserve. The executive branch already has too much power in the U.S. Government and the Federal Reserve has fallen prey to cognitive regulatory capture, making it an unlikely choice for systemic risk regulator (which I have dubbed SiRR)."

At Reuters, Matthew Goldstein says that the big winner in Obama's new regulatory regime are the hedge funds. Why? Hedge funds have escaped any major new regulations, save from requirements that their managers will have to register with the SEC. Goldstein writes: "In short, the registration requirement is no big deal and don't expect much squawking from the hedge fund industry. Obama gave them a great a big kiss." (emphasis mine)

What about accountability? Dean Baker, the co-director of the Center For Economic Policy And Research, likes much of the Obama plan, but his biggest issue isn't that we need new regulators, or more powerful regulators. Instead, Baker argues that we need regulators who will actually do something during the next crisis:

"The basic story of this crisis was not that the regulatory authorities lacked the ability to rein in this disaster before it was too late. Rather, the regulators - most importantly the Fed - opted not to use their power to rein in the housing bubble."

Douglas Elliott of the Brookings Institution gave the Obama plan mixed reviews: "The unfortunate aspect is that political constraints have caused the administration to stop short of a full solution in certain areas, most notably in the consolidation of regulatory functions into fewer hands. Nonetheless, the country should be better off if these proposals are passed than if we were to remain as we are now." (READ Elliott's blog on the Obama reforms for the Huffington Post)

Matthew Yglesias of thinks that Obama's emphasis on establishing Federal resolution authority is the right move. In other words, Yglesias says, we need an empowered Dept. of Financial Crisis:

"There's a plausible story to be told in which the global financial panic was caused less by the collapse of the bubble per se than by the fact that the system had no real way to process the failure of certain kinds of firms. Resolution authority, if done well, could really make a huge difference in the future."

Salon's Andrew Leonard brings up an excellent point -- Obama's proposal aren't set in stone. They're very much a work in progress. In fact, Leonard says the real test will be how Obama administration pushes back, tweaks and revises his reforms, while keeping the broader idea of the "free market" the back of his mind.

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