Financial reform bill likely to lose measure to protect Main Street investors.
New bill language is released (reportedly sometime this week), it is likely to drop the simple "requirement for stock brokers and insurance agents to act in the best interests of their clients."
This common sense statement passed the House without mention. It was included in Chairman Dodd's original draft language. Then the lobbyists went to work and apparently have convinced the Senators that requiring an agent to act in the best interests of his or her client is, well, complicated. The new draft will direct the Securities and Exchange Commission to study the varying rules that govern brokers and investment advisors.
Consider this a tribute to Goldman Sachs. You remember Lloyd Blankfein told the Financial Crisis Inquiry Commission that it was just business as usual for Goldman to create and peddle packages of mortgage-backed securities, lobby for them to be rated triple AAA, and then make independent bets that the securities would go bust. (Astonished Commission Chair Phil Angelides responded: "It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.")
So at the retail level, your broker -- who usually works for a bank or investment house -- will have the banks' interests in mind, not yours. He or she may be encouraged to recommend that you buy the toxic junk in the basement that the bank is trying to get rid of. So it would be complicated -- worth study, surely -- to require your broker to have your best interests in mind.
Yeah, it's come to that. Reforms prospects are bleak. One small thing constrains the Senators, outside of their individual own sense of decency (which is a dependent variable).
The public is furious at the bank ripoffs and bailouts. Across the spectrum, from conservative to liberal, Democrat, Independent and Republican, vast majorities want a crack down on the banks. Folks are looking for tumbrels and guillotines, not SEC studies.
Excerpted from Robert Borosage @ Huffingtonpost
