01-13-2017, 12:05 AM
Timothy Massad, the outgoing chairman of the Commodity Futures Trading Commission, warned the incoming Donald Trump administration against rolling back postcrisis financial regulation. “My belief is that to repeal or dismantle the reforms we have implemented would be a major mistake,” Massad said Tuesday during a speech at the London School of Economics. “Their repeal would not contribute to improving the economic conditions that might have given rise to populist discontent expressed in recent elections.” Financial overhauls introduced after the financial crisis, such as the 2010 Dodd-Frank Act, could however be improved upon, he said.
Don’t repeal financial reforms, outgoing CFTC chief warns - MarketWatch
And former chief economist of the IMF, Simon Johnson:
House Republicans are dead set on repealing financial regulation—rolling back the rules to what they were before 2008. Excessive financial deregulation leads to a predictable cycle of boom-bust-bailout, in which rich people do very well, and millions of people lose their jobs, their homes, and their futures. During the last crisis, presumptive Treasury Secretary Mnuchin bought IndyMac, a distressed bank, receiving a great deal of help from the government—and then sold it at a large profit. At the same time, millions of Americans lost everything in the housing crash and their appeals for assistance of any kind fell on deaf ears. In fact, appeals for the reasonable restructuring of loans made by IndyMac were apparently also turned down; this lender has a reputation as ruthless (and careless) in its foreclosure practices. If the Treasury Department ends up being headed by someone who gains from economic volatility, how careful would officials really want to be?
Trump himself spoke of the housing crisis as a great opportunity—for him, that is. Rich and powerful people often do well from extreme booms and busts; most Americans do not. Deregulating finance is always sold with the claim that it will boost growth, and in the short run perhaps the headline numbers will improve—but only because we do not measure the economy with any regard for macroeconomic risk. If we had risk-adjusted employment and output (and corporate profits) during the George W. Bush years, we would have realized that economic expansion was based on unsustainable risk-taking in the financial sector—manifest in the crisis of September 2008 and the deepest recession since the Great Depression. In the House Republican mantra, honed over six years of refusing to cooperate with President Barack Obama, financial deregulation did not contribute to the meltdown of 2008. These congressional representatives fervently believe that growth has been slow because of a supposedly high burden of regulation on business—despite the fact that the United States is one of the easiest places in the world to do business.