The State of Financial Regulation

Good news!  Financial regulation is stalled in the senate!  Wait, did I say "Good news"?  I meant: WHAT?  If I may get on a soapbox for a moment (it is after all, a blog), there seems to be nothing but bickering coming out of the U.S. government these days, and that bickering is leading to a whole lot of inaction on things that you would think would be a no-brainer. Chances are if there was a bill called the "Flowers and Puppies are Nice Act" someone would chime in arguing that flowers and puppies are, indeed, not nice.

According to an article in the Sacramento Bee:

Eighteen months after the near-collapse of the U.S. financial system, lawmakers still can't agree on how to fix what went wrong, despite abundant evidence of the economic devastation the crisis has caused.

The House passed a sweeping overhaul of financial regulation in December, but the legislation is now tied in knots in the Senate. There, Democrats and Republicans have argued fruitlessly for months while Americans feel the aftershocks of the meltdown in the form of high unemployment, record lengths of joblessness and a historic plunge in lending.

Of course, just because it's stalled doesn't mean it's dead, but the fact that we're three months into 2010, a year and a half after the financial crisis came to a head, shows a certain lack of urgency on the part of lawmakers.  Citizens of the U.S. are feeling the urgency--be they on the left or right of the political spectrum--but those who actually can enact the change are dragging their heels.  Doesn't exactly inspire confidence.

If health care has taken this long, how is going long might it take to instigate a regulatory system on something so complicated as the entire financial system?  What's most troubling is that there's any question of re-introducing regulations at all.  The regulations were stripped out in the nineties (by Democrats, mind you) and then came to a near collapse in the last decade during the Bush years.  In short, this is everyone's fault, and now they're arguing if something should be done?  The events of the fall 2008 are all the evidence you need, not to mention the subprime meltdown of the summer of 2006.  That should have been evidence enough to enact some new legislation so the meltdown of 2008 didn't occur.

Alas, I'm probably preaching to the converted here. It's not everyday people who don't want some new laws enacted, it's Congress who can't seem to get their act together. 

OK, cynicism over: something will likely get done to improve the regulatory structure.  The question is will it be enough?  If there's one positive about the whole financial crisis is that it has called closer attention to the fine print on mortgages on other loans - so perhaps everyday borrowers will be more careful in the future.  So that's the moral of this story: rather than waiting for Congress to take their sweet time to enact new laws, get your own financial house in order.  Be very clear about the terms and conditions on the debt that you owe and try to avoid new debt whenever possible.

There's never been a more important time to start saving money or getting your debt under control.  The main lesson here is don't wait for others to do the work.

How about you?  Are you taking a closer look at your finances because of the current financial instability? What steps are you taking?  Let us know in the comments.