As an advocate of income investments, I've been interested in the progress of the finance reform bill that is slowly on its way to becoming law in the United States.
We Don't Really Learn About Laws Until They Become Law
Unfortunately, it's extremely difficult to get hard information about laws while they are only bills in process. The mainstream news press in this country no longer tries to analyze the news. It reports only the basic facts, and news about the news (such as, for example, how the death of Senator Byrd could affect the bill).
No mainstream reporter is going to read a 2,000 page bill in detail. Even if they did, that doesn't mean they'd understand the full back background. How many of them have enough experience in finance and investing to do so?
Commentary on the bill may be uninformed or rely upon uninformed sources, and certainly comes with a political agenda.
And according to the AP, there are 400 places where the bill contains what I call "fill in the blanks later" provisions. The details are deliberately left for the regulators to complete. What kind of lawmaking is THAT? Creating a new system of regulation and then allowing those regulators to do what they wish.
Also, and this is frustrating though necessary, bills change -- sometimes a lot -- while in the process. They are cut, trimmed and hastily added to for a large number of political reasons.
The Full Impact of This Law Won't Be Seen For Years
If and when President Obama signed this bill into law, it's fair to say that neither he nor most of its proponents or opponents will fully understand it -- possibly nobody outside of a few congressional staffers. Maybe none of them, since I suspect the actual work is divided into sections, so some of them are experts on parts of it but not necessarily all.
And once all the hoopla is over, people move on to other things. At that point, there are experts who take the broad, sweeping passages of the law and write them up a specific federal regulations.
The finance reform bill creates a new federal agency, the Consumer Financial Protection Bureau. How that agency affects financial institutions in actual practice may depend a lot not only on the bill, but only the person who organizes it from the ground up and then leads it.
This Bill Contains Some Good Provisions
It's easy to take a knee-jerk approach -- as an economic conservative, I distrust President Obama and the liberals who wrote this bill and are pushing for its passage. If they're for it and Republicans are against it, then there's probably many good reasons to fear it. I agree, however, that's not hard fact.
I've heard that the bill will create a legal fiduciary responsibility for stock brokers to act in the best interest of their customers. That is a gigantic, revolutionary move, and I support it. I believe that far too many brokers have ripped off their customers. However, I can't tell from the news whether that's still in the final bill or not.
I tend to support the Volcker rule restricting trading by banks, because I don't believe they are any better able to beat the markets than anybody else. Let them buy up high quality dividend paying stocks and interest paying bonds and hold them forever. I believe that would be in the best interest of their shareholders and customers.
However, I'm quite afraid of the provision giving the new agency the power to seize companies it says are not following the rules. And the provisions for taking investments away from you that the government believes you're incompetent to own.
Personally, I believe that it will be in your best interest to keep your money in income investments and do not rely on federal agencies and bureaucrats to protect you as a financial consumer.
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