US Senate passes financial reform bill
The US financial reform bill has passed the US Senate with a 60-39 vote. It is being called the most sweeping financial overhaul in decades.
Mike Norman, the chief economist at John Thomas Financial said the bill was a good thing, step in right direction. However, he argued that the measure could have been stronger.
The bill will apply new regulations to the financial sector. It will place limits on speculation in the food and fuel markets. It will also allow for the redeployment of human capital into the “real economy” over time, argued Norman.
The legislation fails to fully address the issue of too big to fail institutions.
“That’s am area of the bill from my understanding right now, which, I guess you could classify it as a disappointment if you’re looking to do away with too big to fail,” said Norman.
There has been a lack of growth in the US economy in the past 10 years. The reform bill allows the US to move human capital out of finance and into the real economy to produce assets; the country will grow and be sustained in a “much more healthy and productive way,” said Norman.
One of the key areas addressed in the reform bill is the US housing market. The reforms are aimed at preventing those unable to buy from gaining loans they will later default on.
“You’re still sort of heading over the authority to oversight to the regulatory agencies; they’re going to have to do their job. They were there two years ago or prior to that, they weren’t doing their jobs. So, what’s going to change now? Because they’re not some hard strict fast rules right now, a lot of it needs to be developed,” said Norman.
However, the reform bill is a step in the right direction, he argued.
Thomas Ferguson, Professor of political science at the University of Massachusetts and a senior fellow of the Roosevelt Institute argued that the bill makes only marginal changes to the system and does not attack the fundamental issues that caused today’s economic concerns.
“What brought down the world was when gigantic banks failed,” said Ferguson. “They [Congress] haven’t solved this problem.”
He added that the housing market crisis was not the issues that impacted the financial markets and cause the problem and addressing those issues are important, but will not fix the overall problem.