Good financial reform

By Bart Chilton

McClatchy-Tribune

The financial regulatory reform bill recently approved by Congress and signed by President Obama contains 16 titles and 2315 pages. Some suggest it’s too large and complex. But remember two years ago when financial officials asked Congress for billions in bailouts? That original document: only three pages. Yet, when the Troubled Assets Relief Program was passed and signed by President Bush, it authorized $700 billion in bailouts.

The document’s skimpiness allowed U.S. funds to be funneled to non-U.S. entities. It allowed CEOs to rake in millions, even as their companies received assistance. The point is: size may matter, but quality and content is critical. The new reform bill has both.

One reason this legislation is so detailed is that it touches everything in our economy. That’s good because we witnessed massive deregulation of markets and our economy since 1999. Bankers moved away from banking and into exotic mortgages and bets that some of those same mortgages would fail. Speculators used equity and futures markets as their private jungle gyms. That now changes.

Road map

While large and complex, the law actually sets a pretty good road map for regulators. It gives us the transparency, tools and teeth we need to better regulate markets and ensure we won’t again be faced with massive bail outs. It sets us on a straight and strong course for more efficient and effective markets, devoid of fraud, abuse and manipulation.

For example, the currently unregulated over-the-counter markets where hundreds of trillions in trading occurs out of regulators’ views, will have a bright light cast upon them. The largest traders in commodity markets (markets that impact prices of just about everything people purchase, from car loans to a gallon of gas, orange juice or milk) will now have a limit on the amount of concentration they may hold in a given market.

This can’t help but avoid unsubstantiated price run-ups like we saw at the height the economic calamity, with $4 gasoline and oil at $147 a barrel. Regulators can go after bad actors in markets before it costs consumers.

Finally, there will be a consumer protection entity.

Bart Chilton is a Democratic commissioner on the Commodity Futures Trade Commission, Washington, D.C. Distributed by McClatchy-Tribune.