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There's The Plan, Then The Execution

Publication Date: 
March 31, 2008
Kai Ryssdal

Professor Joseph A. Grundfest was interviewed on Marketplace about Treasury Secretary Paulson's plan to regulate the financial markets:

RYSSDAL: Secretary Paulson came right out and said as much this morning, although a quick look at the calendar would tell you the same thing. Domestic politics being what they are in a presidential election year, nothing much is going to happen with this plan anytime soon.


You know there's that saying in Washington, "the President proposes, Congress disposes." What are lawmakers going to do with this one?

GRUNDFEST: Well, it's going to be quite a while, Kai. Let's remember what happened in the process of creating the Homeland Security Department. There we had a terrorist attack on the United States and it took Congress several years to figure out how to reorganize a group of various agencies and put them together into a new department, so however long it took to put together the Department of Homeland Security, and however painful and difficult that process was, I think it's safe to project that it'll take longer to put in place these measures in the financial markets, and that the process will be even more difficult and more political than what we've already experienced.


Commenting on Poulson's plan of a potential merger of the SCC and the Commodities Futures Trading Commission Professor Grundfest said:

Well I think that's going to be about as easy as finding peace in the Middle East. The futures markets have been at odds with the securities markets for years, and if anyone thinks that it's going to be easy to bridge that gap, I think they simply have no experience in terms of the history of that debate in Washington, DC.


...when you consolidate these agencies, it can actually affect the flow of money to political campaigns in Washington. For example, most people don't realize that the Commodity Futures Trading Commission is overseen by the Agriculture Committees up on Capitol Hill, and it's because they have that oversight that many of the large investment banks that actually trade in financial instruments, and really don't care that much about soybeans and pork bellies, wind up visiting with senators on the Ag Committee, and contributing substantially to senators on the Ag Committee.

Asked about his personal opinion on this matter Joe Grundfest said:

Well, you know, I think there's a great deal of benefit that can be had from rationalizing the rather achaean, baroque, balkanized structure that we have in Washington, DC, but at the end of the day, I really think the question goes to the quality of regulation, rather than the quantity and the allocation of responsibility. As we wind up working our way through this battle, I think we have to keep our eyes on the prize, and that is are we moving to a world of smarter, cost-efficient regulation, or are we just going to be piling on additional requirements that at the end of the day, don't make the financial world a better or safer place for anyone.