The populist rabble-rousing on Capitol Hill is getting ominous.
"I see it as one of our potentially last chances to get control, particularly of financial institutions in their mega-forms, before they take over the world," Rep. Paul Kanjorski said of the banking regulation reforms proposed by the White House and congressional leaders. But for Kanjorski and Rep. Earl Perlmutter, both Democrats, the bill doesn't nearly go far enough.
Both men, whose districts include few, if any, Fortune 500 companies, want to undo the deregulation enacted a decade ago, which demolished the barriers between commercial and investment banking, among other rules. Perlmutter's "light-touch" option would simply allow whatever will be regulating banks to require hybrid commercial-investment banks to keep certain capital reserves. Kajorski's more draconian proposal would give regulators the preemptive authority to place limits on the size, complexity or risk of any financial company that presents a systemic risk to the economy.
The proposed amendments instantly fired a furious, and equally hyperbolic, response from the financial community. Rob Nichols of the Financial Services Forum said "preemptively breaking up large financial institutions is very ill-advised." But the prize goes to the Partnership for New York City, which warns that if the amendments become law, the Big Apple is doomed to become a provincial backwater in a third-world country.
In a letter [http ://www.scribd.com/doc/22479759] to city's congressional delegation, Democrats to a man and woman, the Partnership says the Kanjorski-Perlmutter rules would "diminish America's standing as a preeminent, global financial center and inflict particular damage on New York."
Curbing Size of Big Firms [WSJ]
NY CEOs Push Congressional Delegation to Resist New Banking Regulation [NYO]