Congress’s Failing Foresight
As the world economy grows, financial regulation becomes an increasingly difficult subject to broach, much less realize. There is no easy answer to the problem; what we know is that a global solution is needed.
The Basel Accords have attempted to bring consistency to the transnational financial sector, but the inability to enforce these regulatory recommendations arguably limits their potential. The G-20 major economies that participate in the Basel Accords are free to interpret—and adopt—them at their leisure. The most recent accords, Basel III, were proposed in 2011, but projected implementation was pushed back to 2019.
This has come to represent a common theme for such regulation. Inconsistency has plagued the regulatory environment, but perhaps the larger issue is its slow and reactionary nature.
Domestic regulators need to identify and close the loopholes to create a global regulatory standard. For financial regulation to be effective over the next several decades, it needs to both span borders and anticipate potential market risks more effectively.
These images illustrate the growth in financial regulation in the United States after economic crises, and the deregulation that often preceded them. Significant pieces of legislation have been highlighted to show political party breakdowns in the House and Senate.
Significant fiscal policy requires and has historically resulted in a bipartisan effort. Sweeping regulation or deregulation has overridden party lines when necessity and the economic environment have trumped political differences—that is, until the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Dodd-Frank exemplifies the growing divisiveness of the US’s political party system, which limits the ability to recover from the most devastating financial crisis since the Great Depression. Allegiance to one’s party has perhaps replaced achieving beneficial resolutions; regulatory progress has stalled. In the 15 years since passage of the Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act of 1999), there has been a noticeable shift from bipartisan efforts to voting along party lines for major financial legislation.