In his press conference, Dodd made the reform package sound as though it was going to go on the attack from all fronts. He highlighted four specific components of the bill: ending too-big-to-fail bailouts, creating a consumer-protection watchdog, introducing an early warning system for systemic risk, and requiring more transparency for hedge funds and derivatives.
Why isn't Dodd's package going to be a financial panacea? Let me count the ways.
Banks and financial institutions were being watched before the crisis unfolded. It was a lack of effective rules and regulations that allowed the system to go haywire, not a dearth of acronymed government organizations in the already thick regulatory soup.
This wasn't a greed that started or ended with the financial institutions. It ran the gamut from the average Joe on the street all the way up to Dick Fuld at Lehman Brothers. And amid the greed-induced euphoria, the folks who were supposed to be regulating bought into it, including rating agencies such as Moody's (NYSE: MCO), financial risk managers, and even former Federal Reserve Chairman Alan Greenspan.
Unfortunately, there's nothing we can do to eliminate greed entirely. However, in the sober light of day following this most recent meltdown, we had the opportunity to set down new, explicit rules to prevent some of the abuses that nearly bankrupted the system. If Dodd's plan is really the best that we can do, it looks like we may be completely missing our opportunity for real change.