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Republican congressmen present a report card of the Dodd-Frank Act.
Regulation can drive a bank's business overseas, as Adam Davidson writes in his latest column. So when should we take Wall Street's complaints seriously? We posed the question to two economists on different sides of the debate - Charles Geisst of Manhattan College and Mark Calabria of the Cato Institute.
Charles Geisst's response is below. See Mark Calabria's response here.
Wall Street has a longstanding tradition of crying wolf about government regulations. Today, Wall Street is crying out about the Dodd-Frank Act, a set of regulations which the banks say will hurt the fragile economy.
In the 1930s, when banking regulations were first introduced to Wall Street, the banks made the same arguments. Franklin D. Roosevelt, no friend of bankers, was portrayed as traitor to his (East Coast Brahmin) class. His sharpest critics branded him a "socialist," a radical who wanted to alter American society.
In the 1930s, there also was a strong indication of the hubris that Wall Street would display well into the future. At the Congressional hearings leading to the reform legislation, most bankers remained silent about their business, deflecting the most pointed questions.
We should not forget that it was those same regulations that produced the longest period of American prosperity, from the end of World War II until 2008. When we hear the cry again today, it has a slightly different twist. Wall Street claims that the knowledge it uses to produce prosperity is esoteric. It is highly technical and specialized, understood only by the best and the brightest.
That condescending claim represents an even stronger need for new, effective regulation.