Legal Commentary

"Dodd-Frank is a full-employment act for regulators that addresses everything but the root causes of the financial collapse."

It serves up a dog's breakfast covering proprietary trading, consumer financial protection, derivatives trading, executive pay, credit card fees, whistle-blowers, minority inclusion and Congolese minerals. Dodd-Frank also mandates 68 new studies of carbon markets, Chinese drywalls, and person-to-person lending, and many other irrelevancies.

None of this deals with the central problem--Wall Street's ability to hide behind claims of proprietary information to facilitate the production and sale of trillions of dollars in securities whose true values are almost impossible for outsiders to determine.

This policy of "systematic non-disclosure"--the absence of complete transparency about what financial firms really owe and are owed--left only its CEOs and their top consiglieres in a position to know what their companies really owned and owed. Consequently, the valuation of Wall Street firms came down to trusting the bank's senior executives--those who often had the greatest stakes in the non-disclosure system.

All this malfeasance was no organized conspiracy, but a self-organizing, automatically expanding gravy train. Its participants included many of the world's largest and most prestigious banks, insurance companies, hedge funds, credit raters, law firms and accounting firms.

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Full post as published by Althouse on July 16, 2010 (boomark / email).