Banking Reform (posted by DT)

Well, I find myself still sporting a hangover from the Health Care Reform battle. Now that it's over and we're all just waiting to see whether the US health care system falls apart or not, we have to move on to other things.

The Next Big Thing in Washington is going to be banking regulation. I (and I'm sure lots of Americans) have a lot to learn about the system of banking regs at this time, and what's needed- I don't really get the ins and outs of it at this point.

So here's what is clear to me even if details aren't: some sort of big change is needed. I know, it's not exactly an earth-shattering statement. But keep in mind that there has thus far been no systemic change whatsoever in the rules that govern the financial industry. A year ago everyone agreed that the system had let us down due to "too big to fail" banks, excessive leveraging of risky investments, conflicts of interest by ratings agencies, the Moral Hazard problem, and a culture on Wall Street that encouraged short-term gain at the expense of long-term stability. But now that we're a bit removed from the crisis I hear Wall Street corporations and their congressional allies complain that regulations on the table will stifle innovation and weigh the industry down with excessive bureaucracy.

But I haven't seen a conservative solution to the problem proposed by the industry. What's their solution? They're essentially saying "the system has now corrected itself, no need to worry", which means to me "nothing has changed, and when this happens again you're going to have to pony up a bailout again".

So I hope Democrats fight hard for serious reform, and if it stifles some innovation on Wall Street but also forestalls the next enormous failure, I can live with that.