President Barack Obama signed into a law the most sweeping overhaul of U.S. financial market regulations in generations, marking the conclusion of year-plus effort to craft a legislative response to the 2008 financial crisis.
Speaking before he signed the legislation, Mr. Obama pitched it as a major step toward correcting the problems that contributed to that crisis and the severe recession that followed. “For years, our financial sector was governed by antiquated and poorly enforced rules that allowed some to game the system and take risks that endangered the entire economy,” Mr. Obama said.
That implies we have new rules and we know what they are, right? Wrong. The rules will be written in the coming months by, well, we don’t know yet.
There is no way in you-know-where that Obama really believes this new law will put an end to system gaming and systemic risk taking. As long as there are powerful bureaucracies there will be incentives to game the system, and as as long as government plays the role of safety net for a banking cartel — and it will continue to do so — it will encourage risk taking that wouldn’t occur in a freed market.