The biggest problem with President Obama urging regulators to move faster on new rules for Wall Street is that neither the banks nor their regulators are on top of the huge pile of nearly 15,000 pages of regulations emanating from the 2,500-page Dodd-Frank legislation of mid-2010.
If examiners spend three to five days per week overseeing ongoing operations within a target bank, then when are they supposed to catch up with the deluge of new mandates and know what the final regulations will mean?
Global financial institutions have paid over $20 billion in fines in the past couple of years. The biggest banks have been the most heavily fined, yet most of them have several hundred personnel assigned to external compliance. They too are struggling to keep up with the volume of new proposed regulations (pity the smaller firms).
The really big mistakes made recently by major banks focus more on failures with internal controls rather than with identifying a cabal of get-rich-quick criminals within their organizations.
The Obama administration should take a view similar to the one they have taken on health care. Rather than rush forward with the remaining nearly 55 percent of the Dodd-Frank mandates, let’s call for a pause.
It is important to have a debate on whether banks should make most of their income with trading activities and the risks, known or estimated, to the global financial structure.
Let’s also have a discussion as to which laws and regulations give the federal government the right to invade the board room of any company and demand to see their strategy, plans, procedures and internal evaluations of key risks to that strategy.
James is executive director of the Center for Global Governance, Reporting and Regulation at Pace University’s Lubin School of Business in New York. He is also program director of Pace University's Certified Compliance and Regulatory Professional certificate program.