Advisers are wary of President Obama’s financial-regulation plans despite his warning today against a return “to the days of reckless behavior and unchecked excess.”
Speaking in New York on the one-year anniversary of the collapse of Lehman Brothers Holdings Inc., Mr. Obama said the regulatory-reform effort proposed by the administration is “essential” to reforming what’s broken in the global financial system.
That was hyperbole in the view of Arthur Grant, president of Cadaret Grant & Co. Inc.
“It’s so vague,” said Mr. Grant, whose independent-brokerage firm manages $20 billion.
Mr. Grant was cynical of Mr. Obama’s push for requiring the government to pay for its spending plans.
“There were no pay-as-you-go rules in spending trillions of dollars pursuant to [the Troubled Asset Relief Program] and these bailout packages,” Mr. Grant said. “There’s no related spending cuts. So now we’ve spent trillions of dollars, [and] we’re going to reinstitute pay-as-you-go.”
Advisers do not believe that the administration’s plans to add more regulation are the answer to preventing future crises.
“You can create more rules and set more parameters,” said Lou Dolber, chief executive of American Portfolios Financial Services Inc., which manages $9 billion. “In the end, it’s about people. Why not get rid of the people that made bad decisions and made bad mistakes, and bring in better people?”
Increasing regulation will crush small businesses, he added.
“That’s what the country is built on — individuals’ going into business for themselves,” Mr. Dolber said.
He also questioned whether systemic risk can be handled by the
Federal Reserve Board as called for under Mr. Obama’s plan, or by a committee of regulators, which some in Congress have called for.
“If enough firms make bad decisions, it could hurt the economy,” Mr. Dolber said. However, making more rules will not stop the problem, he said.
While advisers do not think adding more regulation will resolve future crises, there is support for filling regulatory gaps to cover derivatives, credit default swaps and hedge funds — a move Mr. Obama called for in his speech to the financial-services industry.
“If there are areas where you have overlap [of regulators] without clear accountability, that’s where a lot of the problems come in,” said Richard Salmen, president of the Financial Planning Association and senior vice president of GTrust Financial Partners, which manages $400 million.
“There’s a lot of finger-pointing without clear accountability,” he said.
