Removing Bill Protecting Economy

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This week, the US Congress may pass a bill to roll back the Dodd-Frank financial reforms that were signed into law by President Barack Obama in response to the 2008 financial crisis. The reforms included sweeping regulations for banks and hedge funds that were criticised by some as confusing, expensive and overly restrictive. Now, politicians are claiming that a roll-back will encourage regional and community banks to extend credit to young couples and farmers, as a way of appealing to voters in November’s mid-term elections.

But there is scant evidence for such claims, argues Rana Foroohar in her latest column. The numbers show that loan growth at community banks is already stronger than the industry average. Meanwhile young people are loaded with student debt and reluctant to take on more. In truth, says Rana, the politicians who are keen to see the regulations weakened are downplaying the advantages such a move would hand to larger banks.

The US is at the end of a recovery cycle, Rana notes. Debt loads are at record levels and interest rates are heading up. Is this a good time to be weakening regulations designed to prevent another crash? Her answer is an emphatic “No”.

Dying democracies
Liberal democracies can only survive when they deliver economic prosperity for a substantial portion of the population over a long period of time, observes Wolfgang Münchau. Centrists in Europe must learn this valuable lesson and look at Italy as a case in point. Its rise of populist parties, such as Matteo Salvini’s League, is a worrying sign. They are in power precisely because the centrists failed to deliver — and they have no incentive to play by the old rules.

Uniting the UK
The leader of the Scottish Conservatives Ruth Davidson warns that as Britain leaves one political union after Brexit, it must protect and enhance another: its own. She expects the Scottish Nationalist government to continue to press for a second referendum on independence for Scotland and exhorts her fellow unionists to bolster the case for preserving the UK. One way to do that would be to ensure that the talent, money and status that floods into London is shared more equally around the rest of the union.

Dollar dilemma
The US currency’s supremacy can no longer be taken for granted, writes Eswar Prasad. While President Donald Trump’s calls in favour of weakening the dollar may amount to hot air, there are other factors that could derail it. It comes down to trust. Mr Trump’s attacks on US institutions such as the free press and the judiciary are eroding that trust. And this, combined with reckless fiscal policies, could cause investors to hesitate.

Best of the rest

John McCain’s long fight — Amy Davidson Sorkin in the New Yorker

Machine learning is stuck on asking ‘Why?’ — Kevin Hartnett in the Atlantic

Scarlet letter in the Emerald Isle — Maureen Dowd in the New York Times

Germany’s great European heist — Adam Tooze and Shahin Vallée for Project Syndicate

Carillion fiasco shows why auditors must be accountable to parliament — Richard Brooks in the Guardian

What you’ve been saying

A wider net to catch mismanagement — letter from Marilyn Croser and Susan Hawley

The category of person who can bring proceedings against directors should be widened from shareholders to anyone with a legitimate interest in the company and this should be complemented by the creation of a positive obligation on directors to mitigate against serious harms. Presiding over serious corporate failings should also be grounds for directors’ disqualification and criminal prosecution in the most egregious cases.

Comment from Timpull on Brexit Britain has closed to foreigners

I have personal experience of this, when setting up an early stage high-tech business in Singapore four years ago just as the government there, under pressure from nativist concerns, visibly made the environment more hostile for skilled and unskilled migration. It made me realise such constraints could easily make the difference between success and failure when dealing with rare skills and a limited local talent base.

Regulators will struggle to rein in resilient bitcoin — letter from Nima Tabatabai

The question is not whether bitcoin will be a target of regulation (it will) and resultant short-term impacts on pricing. Rather, as an open-source software project without any leadership, a globally decentralised operating model and a proven dynamic resilience to attacks, can financial regulators control this emerging digital monetary asset at all in the long run?

Today’s opinion

This is exactly the wrong time to roll back financial reform
The US is at the end of a recovery cycle, with debt loads at record levels

Italy illustrates the way to liberal democracy’s demise
Complacency about the rise of populists is typical of failing political systems

America beware: dollar supremacy is not forever
Under Trump, the US is increasingly seen as an unreliable partner

For the UK to survive, it needs to be less London-centric
More care and attention is needed to protect Britain’s other political union

The Big Read

The Big Read: Information wars: How Europe became the world’s data police
The EU’s rules for data privacy were once derided as restrictive, but after the Facebook scandal Brussels hopes they will help bring big tech to heel

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