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President Obama and leading Democrats are calling the "Restoring American Financial Stability Act of 2010" the greatest overhaul of Wall Street since the Great Depression. And that may well be true. But judging from the many loopholes in the legislation—with more to come as the banks maneuver stealthily to tweak the final product in conference—the new bill might be better termed "the Accountants' and Lawyers' Welfare Act of 2010." The bottom line is that despite the blizzard of amendments and provisions added—including some very smart changes at the 11th hour, like imposing greater control of ratings agencies—what's likely to emerge on the other side of this in the years to come is a Wall Street that's largely unchanged if marginally more regulated.
Indeed, if any structural changes to Wall Street follow from this law, it is likely to be that the biggest banks get even more powerful than they already are, despite the size limits being placed on them.
The accountants and lawyers—read lobbyists—have already made some serious inroads. Sen. Maria Cantwell of Washington State had wanted to add a simple provision shedding light on the vast "dark" market in swaps, which until now has been almost entirely unregulated. The language stated clearly that it shall be "unlawful" if a swap that the Securities and Exchange Commission wanted to be "cleared" out in the open was not cleared. But that language was somehow deemed too strong or troublesome for the industry. Now there is no threat of a finding of illegality and no penalty promised if swaps deals don't go through a clearinghouse. Another provision, also introduced somewhat mysteriously, says that clearinghouses can't be forced by authorities to accept swaps for clearing—again, allowing at least some swaps to be traded privately by default. All this led Cantwell to vote against the bill because, she said, "it fails to close the very same loopholes in derivatives trading that led to the biggest economic implosion since the Great Depression."
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