Labor & Employment Law

Congressman Barney Frank gives a briefing to the New England Council

By Dobin & Jenks

This morning I attended a Breakfast with Congressman Barney Frank sponsored by the New England Council in Massachusetts. I was excited to attend this breakfast to get a play by play as to how the financial reform was going. I have to say my initial fears of further regulation in yet another industry were put at bay, for the moment. I appreciated how Mr. Frank began his talk by giving some assurance that regulation was being initiated not with a socialist fervor but as recognizing that the financial industry is a private sector. The public sector is only being called on to create rules to deal with a present crisis.

Mr. Frank proceeded to discuss the historical regulatory creations as they have appeared in the past to deal with financial issues such as the Securities and Exchange Act of 1933 which dealt with the crash of 1929. He did not suggest that the repeal of the Glass-Steagall Act necessarily spawned this present financial crisis. However, he suggested that the present financial reform is meant to tackle non-financial, non-depository and non-regulated institutions. In light of the heavy regulation in the financial and insurance industry, Mr. Frank further suggested that the credit default swap, a form of an insurance product and a hedge, was not regulated and was based on a notional almost mystical value.

What the reforms are attempting to tackle are the products that have grown out of an industry that is continuously growing in sophistication. Mr. Frank mentioned that the means became the end which was only to make money, instead of the means leading to the end. He also suggested that the new reforms would abolish the requirement that credit ratings be obtained as required in the past and that buyers will have the right to sue a credit rating agency.

I think the government may be on the right track. We may never be quite sure how we got into the current crisis but we can try to prevent them from being repeated and wait for the next.

Full post as published by The Law Planet Blog on June 07, 2010 (boomark / email).