Three and a half years after the Dodd-Frank financial reform bill passed in the summer of 2010, the long-awaited Volcker Rule, restricting banks’ ability to gamble with taxpayer-insured money, has finally been released. And miracle of miracles, it’s actually not that bad.
Sure, the Rule is not as strong as it could have been. And, sure, it almost definitely gives banks more “wiggle room,” as Senator Jeff Merkley put it, than we would have liked. But considering that many financial reformers have been writing eulogies for Dodd-Frank since the day it was passed (they complained that it was too weak and too riddled with loopholes to ever do any good), the fact that the Volcker Rule is actually passably strong is really, really good news.
There are two take-home lessons here.
The first is that the rulemaking process takes time. For the past three and a half years, we’ve all been reading article after article lamenting that regulators have blown past their deadlines, and that half of the 400-some-odd rules from Dodd-Frank have yet to be written or finalized. While both those points are true, it’s important to remember that regulators haven’t exactly been sitting around twiddling their thumbs.
As I chronicled in an article on Dodd-Frank implementation earlier this year [editor’s note: Democracy editor Mike Tomasky called it “the best article on how Washington works I’ve read in years”], the federal regulatory process is a complicated, harrowing gauntlet, dominated largely by industry lobbyists who work to complicate and gum-up the rulemaking process in any way they can: by feeding rule makers flawed or incomplete information, by reinterpreting the language of the law itself, by engineering loopholes into the rules, and by suing agencies retroactively, often succeeding in getting entire hunks of the law chucked out on a technicality. So when it comes to writing rules governing really complicated processes—which includes nearly every financial regulation out there—reporters and savvy readers alike should consider skipping the tired “missed deadline/incompetent bureaucrat” rhetoric and focus instead on the multitude of challenges facing the hardworking, unelected rule makers working behind the scenes of our democracy to produce meaningful regulations, like the Volcker rule—even if it comes out a couple years late.
The second lesson (and forgive the Levar Burton moment here) is that paying attention to these weedy, labyrinthine processes actually matters. As Wonkblog’s great Lydia DePillis points out, the Volcker Rule mentions the grassroots financial reform group, Occupy the SEC, 284 times. While that’s less than half the number of times (599) it cites the financial industry’s powerful trade group, the Securities Industry and Financial Markets Association, it’s still significant and shows that when a small band of dedicated, well-informed citizens get together, write letters, meet with members of Congress, work directly with rule makers, and fight like hell to have their voices heard, their efforts are not in vain. The Washington Monthly has long been committed to that exact idea, that the more we understand the way Washington really works, the more power we have to fix it and change it for the better—a reason, we hope, that you might consider making a tax-deductible donation this holiday season to keep us going strong.
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