Deck Chairs Secure Aboard USS Financial Regulation
By Kevin Drawbaugh
The big U.S. government agencies in charge of policing banks and markets, despite being excoriated over the severe 2008-2009 financial crisis, have successfully dodged a major structural shake-up. While Congress may yet clamp down on the financial industry from Wall Street to Main Street, a top-to-bottom overhaul of the nation’s regulatory apparatus — which seemed like a certainty a year and a half ago — is not going to happen. As political reality has tempered reform proposals, plans to reconfigure a patchwork bureaucracy stitched together over decades have faded from view, with just one agency closure still on the negotiating table. Only the Office of Thrift Supervision — smallest and newest of the big seven agencies — is likely to be closed with regulatory reform bills in both the Senate and the House of Representatives targeting it for shutdown. Otherwise, thousands of workers will stay in place at the Securities and Exchange Commission, the Federal Reserve, the Office of the Comptroller of the Currency and other agencies ensconced in stately, federal buildings across Washington. Some of their work assignments may change — if Congress actually produces a bill this year and President Barack Obama signs it. “Moving institutions around in Washington is like moving mountains across the Rockies — it’s more than hard to do,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a firm that advises on regulatory policy. “Entrenched interests at the regulators and the regulated create tremendous pressure to keep things as they are.” That explains, partly, why restructuring is not happening on anything like the scale once envisioned at the height of the financial crisis, which tipped the U.S. economy into a deep recession and unleased a worldwide drive for reform.