One year on from it being signed into law, the Wall Street Reform and Consumer Protect Act is on track to meet its promise. Critics attack it, but the act allows financial institutions to perform the vital function of accumulating capital and making it available to the productive elements in our society, while minimising the likelihood of irresponsible practices that contribute little to productive economic activity.
Given the magnitude of the crisis, why do some question legislation that lessens the chance of it happening again? The truth is that those who can no longer do things that they have found enormously profitable strenuously object when told to stop. But legislation was always going to be a case of bad news averted, not good news created.
Nonetheless, it is useful to respond to directly. Critics say the bill is disruptive. Yet if it were not, it would have not been worth doing. The financial system had come up with ways to make lending risk appear to go away. The act forced lenders to take responsibility, and make those risks transparent. This discouraged inappropriate risks, and required the private sector (not taxpayers) to provide funds, in the form of more capital against retained risk, and to cover liabilities.