Congress has plans to pass health care reform legislation, and cap-and-trade legislation to combat global warming, and will have to reconcile financial-reform legislation — all by the end of the first quarter of 2010.
Congress has plans to pass health care reform legislation, and cap-and-trade legislation to combat global warming, and will have to reconcile financial-reform legislation — all by the end of the first quarter of 2010.
In that four-month span, members of Congress supposedly are planning to read, debate and merge the more than 1,900 pages of the House's health care reform bill and the more than 1,500 pages of the Senate version. They plan to debate a version of the cap-and-trade legislation in the Senate and resolve differences with the House version; and also read, debate and reconcile the 1,400-plus pages, combined, of the competing House and Senate financial reform bills.
For the record, during much of that time, members of Congress will be on winter vacation. Representatives and some senators will be back in their districts getting a jump on campaigning for next year's midterm election.
Each of these bills will have a major impact on the future of the U.S. economy, and none of them should be rushed. Haste makes waste and very often leads to error.
Debating and passing any one of these bills would have been a major accomplishment in most legislative sittings. Attempting to pass all of them in a little over one year is foolish. It inevitably will result in expensive, unintended consequences.
With the country suffering the aftereffects of a combination of obsolete financial regulation, misguided governmental fiscal and monetary policies, and foolish and sometimes unethical behavior on the part of financial executives and consumers, revamping financial regulation would seem to be a top priority.
Instead, it is trailing behind health care reform and cap-and-trade.
While the two financial-reform bills are similar in many sections, they differ in a few key areas, the most important being the responsibilities and authority of the Federal Reserve.
While the House bill would expand the Fed's powers by allowing it to oversee and restructure large financial firms, and by increasing its mandate to police systematic risk in the economy, the bill introduced by Senate Banking Committee Chairman Christopher Dodd, D-Conn., would take power away from the Fed by restricting its role to that of determining and controlling monetary policy for the nation.
The Fed presently has a far broader role. Its responsibilities include directing the nation's monetary policy to achieve maximum employment, stable prices and moderate long-term interest rates, supervising and regulating banking institutions, maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
Mr. Dodd's bill seems too limiting. The Fed's role in supervising and regulating banks provides it with insight into the health of the banking system and hence the health of the economy. That insight is critical in determining the appropriate direction of monetary policy.
The House bill, on the other hand, seems to overload the Fed with additional powers and responsibilities.
Finding the correct balance between these two visions will be crucial to successful financial-regulation reform and the economic health of the nation.
Given all that Congress has on its plate, and the timetable it has given itself, there must be considerable skepticism that it will get the balance right.
Since it took up financial reform last, it should now not rush but rather take the time to hear the thoughts of those who have studied the causes of the crisis, and get the overhaul right the first time.
