By Ian Swanson - 07/22/10 10:00 AM EDT
The Wall Street reform bill President Obama signed into law Wednesday is serving as a fiscal stimulus for Washington.
At least a thousand new government workers will be hired as a direct result of the legislation, which triggers a massive wave of rulemaking by regulatory agencies.
“Lawyers always win,” joked one Washington insider, who was quick to say that he wasn’t just saying that because he’s a lawyer.
The Securities and Exchange Commission (SEC) expects to add about 800 new positions to carry out its new and expanded responsibilities, while the Commodity Futures Trading Commission (CFTC) plans to increase its workforce by nearly 50 percent, to 1,000 employees, a spokesman told The Hill.
The Federal Deposit Insurance Corporation, which will have additional responsibilities for unwinding troubled institutions whose downfall could hurt the broader economy, also expects a significant increase in employees, though a spokesman said the banking regulator has not projected how many new staffers it will need.
The Treasury and Federal Reserve are expected to wield much greater power under the bill and will also likely expand, though a spokesman for the Fed told The Hill it’s too soon to tell by how much.
The new regulatory staffers and K Street lawyers will be working on more than 200 new rules that must be written under the Wall Street reform bill, according to a chart prepared by the Financial Services Roundtable. It also counts 68 studies that must be drawn up by the bill.
To put that in context, the Sarbanes-Oxley accounting reforms passed in 2002 in the wake of the Enron collapse, the last major legislation affecting financial services, required 16 rules and six studies.
Both bills are significant, but “this one has really shifted power from Wall Street to 1500 Pennsylvania Ave.,” said Richard Alexander, managing partner of Arnold and Porter, referring to the increased power of the Treasury Department.
Alexander, a senior partner in the firm’s financial services group, said the legislation offers opportunities for firms not only in financial services, but in consumer issues and corporate governance, among other issues.
“I can’t predict what the headcount will be, but needless to say there’s going to be a tremendous amount of work created,” he said.
Big banks and other financial institutions will have to deal with the new consumer protection agency created by the bill, and are likely to add in-house help to deal with new regulations that spin out of the agency.
While Obama mentioned credit card fees and bank overdraft charges as two areas of new consumer oversight in his remarks at Wednesday’s bill signing, others say the new law could cover anything from ATM fees to checking accounts.
Wall Street sees the legislation as largely undefined and will be avidly watching the rulemaking process.
“It’s almost like you decided to hold a wedding reception for your daughter for going steady with someone,” Doug Roberts, founder and chief investment strategist for ChannelCapitalResearch.com, said of Wednesday’s bill-signing.
An example of what’s to come next are the regulations SEC, CFTC and others must issue on what is permitted under the Volcker rule, which sets restrictions on proprietary trading.
The rule, named after former Federal Reserve Chairman and current Obama adviser Paul Volcker, limits proprietary trading by banks but doesn’t explicitly define what will still be allowed. Regulators must determine what trading a bank will be allowed to do for its own clients, and when it is trading for itself.
Gray areas abound. For example, if a bank buys up shares in McDonald’s that it knows its clients regularly want, will this be considered allowable proprietary trading?
The process will be long. While rules are to be completed next summer, compliance for the new Volcker rule is set for 2014.
After that, the rules will be implemented, ensuring more business for a number of people in Washington.
Richard Barry contributed to this article.