In case you haven't caught this bombshell yet, Senator Feingold announced that he won't support the FinReg bill as negotiated. This means the bill needs to go back to square one unless there's a Republican defector in the next day or two, which is extremely unlikely.
Immediate implications:
- The severely crippled FinReg bill will not become law. The new law, if there will be one, will be at least a few months away, probably after election. So at least the crisis has a chance of not going wasted. Good.
- Financials will take a beating Tuesday (not necessarily too big), and probably the general market, too. Is that a bad thing? I think the society has latched on the wrong notion of "market up = good" for far too long. Obsessing over daily market moves and quarterly reports has become a national passtime. It's neither good nor bad in its own right. What's more relevant to the vast majority of the people is the health of the underlying economy. If sometimes the right thing for the economy requires a short-term slide in the market, I'd take it in a heartbeat.
Longer term:
- The FinReg bill will get more deliberation, which may end up more sensible or less. But at least the last-minute water-downs will get a closer look. I don't care about the merits of those, the process itself is quite enough to render them as bad jokes.
- Optimistically, it will solve some underlying structural issues exposed by the crisis, rather than disparate, superficial symptoms. It might even include some framework for resolution on the proverbial GSEs, dare I dream?
- The delay may cause some short-term uncertainty. But, as long as the final version does a better job in reducing longer-term risk, it's well worth it.
But what truly amazed me about Senator Feingold is that he's one of the rare brave souls who can go against the group and stand for the right thing.
- He voted against appealing Glass-Steagall.
- He voted against Patriot Act and Iraq war.
- He voted against the TARP bill.
I couldn't have done any better myself. This is a legislative record that will go down history unmatched.
Disclosure: None
