Wall Street Reform: Regulators and Lawmakers Prepare for Turf War

Last Updated Jun 12, 2009 3:19 PM EDT

A former SEC Commissioner recently said to me "Never let a good crisis go to waste." That post-crisis sentiment has been echoed by the Obama Administration, lawmakers and regulators alike.

You might think a near financial melt-down would have at least one benefit: a chance to re-boot the regulatory process and start anew. While almost everyone agrees that we need to create a more streamlined and nimble regulatory process, there's little consensus on how to get there. It's kind of like heaven...everyone thinks it's a great place, but no one wants to be the first to go.

To understand the complexity of regulatory reform, check out this Financial Times chart from this morning's edition:

You might think that a dozen or so regulators might be enough to do the job, but evidently not. The "Balkanized" approach to regulation seems ludicrous, but then again, the British have a single watchdog in the Financial Services Authority (FSA) and that didn't stop the mess.

It's about to get even more complicated. Next week, it is expected that Treasury Secretary Geithner will announce that he wants a "Council of Regulators" which will watch over the the newly-anointed systemic risk overseer--the Federal Reserve.

As you review that chart again, think not only about the heads of these agencies fighting for power, relevancy and redemption, remember that each agency has a corresponding lawmaker that oversees it. Rather than work together to improve the system, regulatory reform could become a classic political turf war. The problem is that once someone has the ball, he's reluctant to give it up.

It's just not that easy to fix this mess. We need regulation that fosters free markets, not free-for-all markets. One that monitors systemic risk; ensures the safety and soundness of individual institutions; and oversees business conduct so that investors are protected. Now can someone pass the ball instead of hogging it?

Image by Flickr User plasticrevolver, cc 2.0
  • Jill Schlesinger On Twitter»

    View all articles by Jill Schlesinger on CBS MoneyWatch »
    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.



Live Video

Market Data

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Watch Now

Market News

Stock Watchlist