Dodd-Frank Implementation and the November Election

Schiff Hardin LLP

Jayne Thompson & Associates

 

The American College of Investment Counsel

September 12, 2012

The Political Landscape and Regulatory Reform:

The Potential Impact of the 2012 Elections

Opening remarks of Chris Robling

Principal, Jayne Thompson & Associates

 

A friend who works for a Congressional banking committee observed today that politics and business have very different timetables.

Business has some latitude to plan 36 or 60 months ahead, whereas politics is a process of managing expected net value on almost a real-time basis.

And into this mix we thrust the bureaucracy, which moves at its own pace, usually glacial.

Asked to discuss the Lame Duck Session today, this participant says, ask me the day after the November election.

Asked about Spring 2013, the answer is – “Ask me after the Lame Duck.”

So today I want to reference different categories – or approaches – in an evolving environment — and then move to some political scenarios that might help us describe alternatives, if not predict outcomes.

To give away the ending, I underline the conclusion that this period calls on all who must work with its products to pay very close attention, and this period calls on all who would influence its results to gather as closely as they possibly can to the appropriate loci of activity.

Categories

For the sake of this conversation, I suggest that about Dodd-Frank, there are two types of people: those who supported the original measure and those who opposed it.

Layering on top of that, there are those who think it should be “Repealed and Replaced” and those who think a series of internally-consistent corrections will tune it to where it should be.  Generally, those who support at the margin a “Fine Tuning”, or a tiny bit more regulation to get a “Right Result”, supported its passage.  Those who, instead, think the next best step to take in any regulatory scheme is to rely on marketplace competition, opposed the bill.

BUT THAT WAS TWO YEARS AGO.  We are two years down a very complex track, so even opponents then must to some extent live with – today.

Environment

Today’s environment: Senator Levin is investigating JP Morgan’s whale.  Peregrine.  MF Global.  Even Barclays and LIBOR.  Two years of D-F cuts both ways: “It isn’t really finished” and “What has it done?”  All of these events must then be seen against the negative economic situation and growing widespread concerns about restoring growth.

Scenarios

All of us understand the scenarios:  Obama or Romney, Senate stays Democrat or flips, and House stays Republican.  Those work to four, but really only three:

Obama – Dem Senate – Gopper House → Status quo

Obama – GOP Senate – Goper House → Finer disagreements

Romney — Dem Senate – Gopper House → Finer disagreements

Romney — Gopper Senate – Gopper House → Big changes

Let me hasten to note that the independence of some of the agencies involved, including the board member replacement schedule, makes them distinct from some of the partisan results.  They remain something of a constant.

Alternatives

For reasons that I hope will come out in the conversation, I think all of this boils down to two alternatives:

First, mind-numbing, endless fine-tuning.  This could go on for the rest of our careers.

Second, a massive halt — with ad-hoc developments from there.

Here is what I mean:

If Democrats are ascendant, then fine-tuning will continue for years – until the next systemic crisis.

If Republicans are ascendant, then a Reaganesque Halt, probably repealing a few marquee provisions, followed by piecemeal revisions, is likely — until the next systemic crisis.

Finally, on this day of the German Constitutional Court’s decision allowing the ECB to open its liquidity window, allow me to observe the next systemic crisis might originate in the most obscure of places.

As to when, I paraphrase  the 1949 hit tune, with words from noted banking expert Herb Magidson, “Enjoy Yourself, It’s [quite possibly] Later Than You Think.”

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Explore posts in the same categories: Current Events, Politics

3 Comments on “Dodd-Frank Implementation and the November Election”

  1. idic5 Says:

    you forgot :
    Obama – Dem senate ; Dem house —> big changes (like, for example, a proper restoration of Glass Seagal)

  2. idic5 Says:

    you forgot :
    Obama – Dem senate ; Dem house —> big changes (like, for example, a proper restoration of Glass Seagal)

  3. chrisrobling Says:

    Glass Steagall, i think, might need a 21st century re-interpretation. As for House Dems — while possible, their take-over is highly unlikely. Cheers, c


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