Dodd Frank, Governmental Fiduciary Duty and a Lot of Hot Air

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) March 29, 2011 -- Government Fiduciary Duty

Here is where the Dodd Frank effort can break down. Same as most other issues- politics and money.

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Dodd Frank, Governmental Fiduciary Duty and a Lot of Hot Air

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Former FDIC chairman Bill Issac stated in 2011, “The Dodd Frank Bill- the one major piece of legislation to emerge since the financial crisis--is mostly meaningless. Dodd-Frank does nothing to address the root causes of the financial crisis, and it won't prevent the next one. Specifically, Dodd-Frank will just create more bureaucracy and red tape. Meanwhile, our biggest banks are still "Too Big To Fail." Our commercial banks are still allowed to take way too much risk. Our regulators are still balkanized and political. And we still haven't addressed Fannie Mae and Freddie Mac.”.

Federal Reserve Bank of Kansas City President Tom Hoenig-"In spite of all that's been done and debated, the soundness of the largest financial institutions and the systemic risks they continue to pose is no better," . "In my view, it is even worse than before the crisis."

And as regards the SEC indication to go forward on the ‘smaller scale’ of fiduciary requirements for brokers- “Rep. Steve Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, along with other Republican members of the committee, told Securities and Exchange Commission (SEC) chairman Mary Schapiro in a March 17 letter to not move forward with a fiduciary duty rule as “the Commission has not identified and defined clear problems that would justify a rulemaking and does not have a solid basis upon which to move forward.”

Though I have addressed the lack of knowledge and competency herein by effectively all the governmental bodies, Dodd Frank, at all levels, is going to be subjected to such outside powers of the banking and securities lobby and by political tomfoolery that nothing major might be accomplished .

It is impossible to ignore the comments from past and present independent officers of the FDIC or the Federal Reserve Banks. It is impossible to ignore the comments from Harry Markopolos regarding his almost useless efforts with the SEC and Madoff. It certainly is impossible to ignore the politics that unquestionably has powerful and expen$ive lobbying behind it. However it is true that the SEC has not determined the clear problems of what is going on in real life. They can’t and that is the biggest problem. Since they have never required RIAs or anyone else to understand the fundamentals of investing; they (apparently) do not know that no one has been is called a broker for at least 15 years; they don’t know what they don’t know. So if no one knows the real problem, politics may override all efforts, even as they truly are designed to help the consumer.

On the other side however was a concern about how brokers might survive a focus to fiduciary. Under the guidelines submitted herein, they wouldn’t. The demand for knowing the fundamentals of investing would completely change the industry. Even series 7 reps might have a hard time grasping the teachings (depends on who is also doing them, how much the cost will be, and, specifically, being guided to the real life applications.) That will unquestionably reduce sales since they will find out that a lot of their previous sales were unsuitable. (For a podcast from FINRA regarding suitability, see http://www.finra.org/Industry/Education/OnlineLearning/Podcasts/Suitability/P123368?utm_source=MM&utm_medium=email&utm_campaign=Weekly_Update_032311_FINAL). Really doesn’t say much more than suitability would be determined by the facts of the case. And, unfortunately, when you have litigants, arbitrators, experts, and the attorneys pretty much bereft of the fundamentals, certainly risk of loss, then the cases cannot really address much in any fiduciary pretext since the participants are so limited in scope.

Even before the instruction was mandated, you would find lots of brokers leaving the industry forever. The same for insurance agents if impacted by implication to Dodd Frank. (Years ago when California implemented mandatory continuing education, I think the loss of agents approached 50%.) Those who wish to continue as financial planners, consultants, advisors et al would have to effectively learn much of their trade over. Those in it for sales or just trying to get as much money under advisement would falter as well. Commissionable sales would drop dramatically. Sales of individual stocks would drop. Corporations would have to find true fiduciaries for 401k presentations and literature and those would almost assuredly demand a change to the current simple ‘prudent man rule’ by establishing t

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