Volcker Rule Limps To Finish Line
"The Watchdog" is back off the leash, with more bark and bite. After a six-month break to focus on some other duties here at HuffPost, I'm happy to be on the beat again, keeping a close eye on the regulators and how their actions affect the lives of everyday Americans.
Volcker Rule Limps To Finish Line
The final version of the Volcker rule, one of the most vehemently debated provisions of the Dodd-Frank financial regulatory overhaul, remains up in the air. On Wednesday, top regulators from the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency will appear before the House Financial Services Committee, where they are expected to face tough questions from Republicans, who consider the proposed rule unworkable, and from Democrats, who are concerned that regulators have watered down the provision. The rule, named for former Federal Reserve Chairman Paul Volcker, would ban banks from engaging in proprietary trading -- that is, making financial bets with their own money for their own profit.
Although it's been more than a year and a half since the passage of Dodd-Frank, the rule has been delayed due to its complexity and the opposition of the financial industry, which seeks broad exemptions from the rule. On Monday, Goldman Sachs President Gary Cohn told the Telegraph that if the rule is implemented as intended, banks will be devastated and "liquidity in all markets will dry up."
In addition, the CFTC took longer than other regulators to pass its proposal for implementing the rule, and the business lobby has demanded more time to analyze that proposal. As a result, the deadline for comments on the CFTC's version of the rule has been pushed back from Jan. 30 to March 11, reports The Hill.
Cruise Ship Regs Under Review After Accident
The tragic grounding of the cruise ship Costa Concordia off the coast of Italy last week, resulting in at least six deaths, may lead to revised safety regulations, said Koji Sekimizu, secretary-general of the International Maritime Organization. Noting that this is the centennial year of the Titantic disaster and cautioning that the causes of the Costa Concordia accident have yet to be determined, he told an IMO meeting on Monday:
We should seriously consider the lessons to be learnt and, if necessary, re-examine the regulations on the safety of large passenger ships in the light of the findings of the casualty investigation. In the centenary year of the Titanic, we have once again been reminded of the risks involved in maritime activities.
Stanford Sidekick Settles
Alleged Ponzi schemer Allen Stanford's $7 billion investment fraud trial doesn't begin until next Monday, but one of his former associates just settled an interesting conflict-of-interest case with the Justice Department. Dallas lawyer Spencer Barasch joined the Stanford Financial Group in April 2005 after leaving his job as head of enforcement for the SEC's Fort Worth, Texas, regional office, where prosecutors allege he repeatedly thwarted initial probes into Stanford's activities. After he left the SEC and was barred from representing Stanford before the agency, prosecutors say that Barasch nonetheless did so for several months in 2006 with the intention of influencing and obtaining information from the SEC. Barasch agreed to pay $50,000, the maximum civil fine for a such a violation, to settle the case. But the SEC has rejected a proposed settlement with Barasch and its investigation is continuing.
SEC Slammed For Soft Penalties
In other SEC news, it was a busy 2011 for the agency's enforcement division with a record 735 enforcement actions, including a 30 percent increase (over 2010) in actions brought against investment advisers and broker-dealers, and highlighted by several prominent insider-trading cases. But the agency has been faulted for not pursuing more cases related to the financial crisis. And those few cases -- which include charging Citigroup Global Markets with misrepresenting to investors the quality of fund assets and failing to disclose its own short position -- produced only negligence-based fraud charges, which result in softer penalties, instead of intentional fraud claims, which result in tough penalties but are harder to prove, according to a report prepared by the law firm Wilmer Hale.
Obama's Reg Review One-Sided, Say Scholars
A year ago, President Barack Obama initiated a much-debated regulatory review across the government. The results so far have been relatively one-sided, with changes focused on reducing costs but not enough emphasis on determining effective regulations that could be expanded, argue Richard Revesz, dean of New York University School of Law, and Michael Livermore, executive director of Policy Integrity, in a HuffPost blog:
Businesses will be pleased to hear that the October memo puts all its emphasis on using retrospective review of regulations to achieve cost-savings and eliminate "annual paperwork burdens." A template report attached to the memo asks agencies to describe, quantify, and monetize anticipated cost-savings from these actions.
But, a year after the original request, the administration needs to even out this process: looking at the rules where the public benefit could be increased at low cost would also be wise. The goal of regulations is to maximize net benefits. Rolling back expensive and ineffective rules is one way to get there, but so is expanding inexpensive and effective programs. Obama's Executive Order provides a blueprint not only for improving businesses' bottom lines but for adopting beneficial regulations that protect the well-being of the American public.
Big Step Forward for Food Safety Possible
If the Obama administration is granted the authority by Congress to reorganize government agencies, one of its steps would fulfill a long-sought goal of food safety advocates. Jeff Zients, management director at the Office of Management and Budget, told the Hagstrom Report that the White House is considering consolidating the U.S. Department of Agriculture's Food Safety and Inspection Service with a similar unit at the Food and Drug Administration. Food safety advocates have long pushed for the move, arguing that food safety should be independent of the USDA, whose role is largely to market and promote agricultural products. Such a transition has also been supported by the Government Accountability Office, which published a report this past spring that noted, "Fragmented food safety system has caused inconsistent oversight, ineffective coordination, and inefficient uses of resources."
Ax Swings At IG's Office
In a classic example of the Washington blame game, most of the staff is about to be let go at the inspector general's office of the Corporation for National and Community Service, but it's not clear who made the decision to cut in half the office's $4 million budget, reports the Federal Times' FedLine blog. Democrats have blamed House Republicans, but several GOP senators say they have urged Sen. Tom Harkin (D-Iowa) to restore the funding to no avail. The irony, according to the office's acting chief, Kenneth Bach, is that severance packages in some cases are close to the employee's annual salary.
Get Out Your Thesaurus!
And last month, Business Roundtable President John Engler claimed that the "regulatory umbrella is blotting out the sun, it's so big," in an interview with the Washington Times. Citing the National Labor Relations Board, the Department of Labor, the Environmental Protection Agency and even the State Department, the former Michigan governor said that costly regulations are "epidemic across the government."