It is no surprise that, in the context of a major recession blamed by some in part to a lack of regulation, the new administration would implement wide-ranging rules to try to avoid or limit the causes of future downturns. Unfortunately, responding to financial crises by greatly increasing regulation has become part of the politician’s playbook. Indeed, the June 17 release of the much-awaited proposal, “Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation,” issued by the Department of the Treasury, quickly exposed a philosophic debate as to the best way to protect against future recessions caused in large part by financial market meltdowns.
The 89-page plan proposes a regulatory structure that will protect large institutions (those deemed too big to fail) but subject them to more stringent and failsafe reporting. Some commentators argue that any proposed regulations need to prevent institutions from becoming too big in the first place. See, e.g., Eric Dash, “If it’s Too Big to Fail, Is it Too Big to Exist?,” N.Y. Times, June 21, 2009, at WK3. There is, however, one inescapable result from the debate. Whatever plan is implemented will increase significantly the compliance burdens of American corporations at a time when they can least afford an expansion of their legal spend.
