Your humble blogger would like to suggest that Senator Warren take the Republicans up on their offer and propose the following compromise:
In exchange for ensuring accountability and transparency at the CFPB, the rest of the Dodd-Frank Act is repealed and replaced with a law requiring transparency, specifically valuation transparency, be brought to all the opaque corners of the financial system. Under this law,
How can the Republicans possibly decline the opportunity to let the market function properly? After all, it is well known that the necessary condition for the invisible hand of the market to actually work is valuation transparency. Specifically, that market participants have access to all the useful, relevant information so they can independently assess this information and make a fully informed decision.
- Banks would be required to provide ultra transparency under which they disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.
- Structured finance securities would be required to provide observable event based reporting on all activities like a payment or delinquency involving the underlying collateral before the beginning of the next business day.
How can the Republicans possibly decline the opportunity to get rid of the explosion in complex rules and regulatory oversight like the Volcker Rule that make up Dodd-Frank? In an era of endless budget deficits, here is an opportunity to save substantial sums of money.
How can the Republicans possibly decline the opportunity to get rid of the Office of Financial Research (aka, the government agency where transparency goes to die)? The whole point of bringing transparency to all the opaque corners of the financial system is not to have agencies like OFR having a monopoly on information that market participants need if they are to have all the useful, relevant information.
How can the Republicans possibly decline the opportunity to end the market's reliance on supervision by bank regulators and the related taxpayer funded bank bailouts when supervision fails? With ultra transparency, the market can exert discipline on each bank to reduce its risk of failure. If it does fail, market participants can absorb the loss because they could assess what was happening at the bank and have limited their exposure to what they can afford to lose.