The White House recently released details of its proposed overhaul of the nation’s regulatory framework for financial services.1 In the main, the regulatory reform (the reform) would consolidate data and authority within the Federal Reserve, which, as a systemic risk regulator, would monitor the largest financial firms to prevent a recurrence of the unprecedented risk-taking that has threatened so many on and off Wall Street. But the reform, by touching upon all corners of financial services, also reveals the new president’s hopes on topics ranging from insurance regulation to executive compensation to arbitration clauses in customer agreements.
Concerning securities regulation, the reform continues two time-honored trends: focusing on the monitors at the top (like the Securities and Exchange Commission (SEC)), and specifically addressing those issues most readily blamed by an electorate (like over-extension of capital). While the reform’s concentration of power in the Federal Reserve has garnered a fair share of critical press,2 what has been perhaps overlooked is how little the reform adds to previously proposed protections for ordinary stock market participants; stated more bluntly, the reform—while a broad map embodying careful political compromises—arguably offers retail investors less theoretical protections than did the prior administration.
2008 Treasury Blueprint
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