In a world of growing governmental over-reach it is rare to find a regulator who wants to do less not more. But it makes sense. Budgets are made, and funding allocated, based on predicted needs of tomorrow not the reality of last year. Legislators make rules and then push to implement them all in the name of the public good, and too often without the benefit of balanced experience. SEC Commissioner Daniel Gallagher is a rare breed of appointed official who frequently asks when is the last time we removed a rule instead of just adding more to the pile?
Commissioner Gallagher, in a speech delivered to the Harvard Law School Symposium in Frankfurt, Germany, drew a parallel to the monolithic mess known as Dodd-Frank. The legislation was thought to improve financial markets but in reality probably has done more to impede productive markets and consumer benefit. Gallagher tackled head-on the Financial Stability Board (FSB), an international effort under the aegis of the G20, and its attempt to “regulate the world unilaterally”.
Never one to mince words, or shy away from hard truths, Gallagher points out;
“Even putting aside issues of national sovereignty and economic freedom, it remains the height of regulatory hubris to assume that not only is there a single regulatory solution to any given problem facing our markets, but that a handful of mandarins working in an opaque international forum can find those perfect solutions. In reality, while such regulators may get some things right, they will most certainly get some things wrong — and, having coerced the world to do it all one way, it will go wrong everywhere.”
While this statement may not be popular with other national financial regulatory types, whose careers are measured by what rules they make instead of which landmines have been avoided, he is right.
Gallagher is not calling for the disbanding of the group, but more of a realignment “to return these entities to their original pre-financial crisis purposes of facilitating cooperation among regulators from different jurisdictions.”
While Dodd Frank may be a “single party, runaway train of legislation, [where] policymakers and special interest groups backed up their dump trucks to fill the statute with decades’ worth of pent-up wish list items” – Gallagher has clearly learned his lesson on the limitations of myopic laws. His concern is not just for global market efficiency and consumer protection, but also for the decline of US capital markets which are “steadily losing market share to other international financial centers”.
The financial industry in the United States is one of the most important (if not THE most important) industries in the country. Regulators and elected officials should be doing everything in their power to promote the financial sector instead of too frequent and gratuitous vilification.
Gallagher states;
“In the U.S., the SEC and our fellow financial regulators should focus less on the misguided goal of de-risking our markets and more on eliminating the red tape that prevents small businesses from accessing our capital markets.”
We must start to address these challenges now.
Must read speech below.
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