Targeting 'Loopholes' in Financial Reform, Newsweek Attacks Bill from the Left
Newsweek’s Michael Hirsh doesn’t want the government to have a hand in financial reform. On the contrary, he’d rather the government have both hands firmly around Wall Street.
In his May 21 Newsweek Web Exclusive, Hirsh was outraged that the “Restoring American Financial Stability Act” had too many loopholes for banks and not enough government regulation. Hirsh went as far as nicknaming the legislation “the Accountants’ and Lawyers’ Welfare Act of 2010” and concluded:
“Indeed, if any structural changes to Wall Street follow from this law, it is likely that the biggest banks get even more powerful than they already are, despite the size limits being place on them.”
Not only is Hirsh displeased with the lack of regulation in the bill, he also theorizes that the legislation will make the banks even more powerful than the financial system, possibly even overthrowing the Chicago Mercantile Exchange.
“’The fear is it would lower risk-management practices at the clearinghouses,’ says a CFTC official – in other words, create a whole new brand of moral hazard. And who is likely to come to control the clearinghouses? The big banks, which will be able to create a whole new futures market of their own, perhaps even displacing the Chicago Mercantile Exchange.”
Hirsh, while disparaging a written and championed mostly by Democrats bill, applauded only Democrat ideas for amending it. He celebrated Sen. Maria Cantwell, D-Washington State, for attempting to “add a simple provision shedding light on the vast “dark” market swaps, which until now has been almost entirely unregulated” and Rep. Stephen Lynch, D-Mass., who “proposed language barring banks from owning more than 20 percent of any clearinghouse.” Hirsh failed to recognize any Republican lawmakers who worked on amending the legislation, such as Sen. Richard Shelby, R-Alabama, who questioned the lack attention paid to Government-Sponsored Enterprises (GSE’s) such as Freddie Mac and Fannie Mae that cost American taxpayers $146 billion in bailout money.
Hirsh cited former economist Rob Johnson as saying that the “resolution powers are helpful but nowhere near sufficient to create the conditions for real ability to close too-big-to-fail institutions.” Of course, Johnson is the founder of the left-wing Institute for New Economic Thinking funded by arch-liberal George Soros, and subject of this glowing April 13 piece also by Hirsh.