The Dodd-Frank Wall Street Reform and Consumer Protection Act passed Congress on a partisan vote last week — somewhat surprising, considering how cautious and non-controversial the bill’s reforms are. Probably the best excuse I’ve heard for voting against Wall Street reform bill is that it was “two thousand pages of new restrictions on American businesses.” But this is an explanation that doesn’t stand up to scrutiny.
I spent part of the weekend reading H.R. 4173, the final version that passed both houses of Congress, was signed into law, and went into effect last week. It’s long, but it’s not 2,000 pages. The actual bill that more than a third of the House and Senate voted against was 848 pages, and these are not big, dense pages, but pages that could be printed in a pocket-sized paperback book.
Furthermore, very few of these pages are about “new restrictions on American business.” Most of them set forth details of the operation of government agencies such as the FDIC, Fed, and SEC. There are, to be sure, section after section of detailed rules for businesses to follow, but most of these have to do with what the bill is supposed to be about: credit default swaps and derivatives. Only about 250 of the largest corporations in the country, plus a similar number of foreign corporations, will be significantly affected. And yes, there is also a long section about blood diamonds tacked on to the end. It’s the kind of thing that makes you ask, “What is this doing here?” and it would appear to be intended as a restriction on business, though it has more to do with government-sponsored organized crime groups in the Democratic Republic of the Congo than with any legitimate U.S.-based business.
Tucked away among the 848 pages of the new law are provisions that place new restrictions on the government. The bailouts of AIG, Citigroup, and who knows how many other Wall Street companies that, over the course of 2008, turned a few routine business failures into a crisis for the entire economy, cannot be repeated. The next time Citigroup finds itself scraping for cash and too insolvent to attract the interest of private investors, it will be faced with this provision:
No taxpayer funds shall be used to prevent the liquidation of any financial company under this title.
The final bill doesn’t contain the kind of provisions that will prevent or slow down the next Wall Street meltdown — only a few of those were considered, and conservatives had enough clout to block them — but at least the next time Wall Street starts to go to pieces, it will just be Wall Street, and it won’t be turned into a crisis for the economy at large.