, Newburyport, MA

January 1, 2013

Lessons to remember from the last cliff

Money Matters
Donald E. Askey

---- — When the big bank HSBC and its officers recently escaped prosecution for flagrant and admitted violations of money-laundering regulations, we all moved from the era of “too big to fail” to the era “too big to indict.”

Did we learn anything from the financial cliff the big banksters pulled all of us over in 2007 and 2008 when their unregulated conduct and toxic products helped precipitate the Great Recession?

Apparently not enough. Big banks, such as HSBC, can flaunt the rules and do so at the risk of relatively small fines. Not one single big banker was brought to trial in the HSBC case or in any of the cases of aggressive risk-taking, which nearly toppled the banking system along with the U.S. economy.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in mid-2010, is meant to have brought the most significant changes to financial regulation since the Great Depression — the antecedent to the Great Recession.

This month, some of the regulations promulgated by Dodd-Frank will take effect, despite strong push-back from the financial services industry. The areas of more stringent regulation are derivatives trading, executive compensation, mortgage lending and credit-rating agencies.

As good as these new protective measures may seem, they represent only about one-third of the regulations called for in Dodd-Frank. And even this third is being subjected to industry challenges in court.

Current noise over the fiscal cliff, which touches primarily on tax policy and management of the federal deficit, has distracted the retail investor — that’s you and me — from acknowledging Dodd-Frank may be our best and only protection from a repeat of our being thrown over the financial cliff only a few years ago.

Can we afford to forget what we have barely recovered from? Can we ignore the need for greater investor protections, even in these times when facing another cliff of a different origin? Today’s fiscal cliff is clearly a product of government policy and not of big industry.

No one seeks more regulation for its own sake. But, for Pete’s sake, let’s let Dodd-Frank be fully implemented for the protection and benefit of the small investor! Let’s not overlook that in the heat of vitriol over the fiscal cliff. Our financial future is no less at risk by bad government policies as it is by unregulated big-bank practices.


Donald E. Askey, a fee-only financial adviser and planner with offices in Newburyport and Boston, can be reached at