Daley Pick Another Win for Wall Street - Opinion

WASHINGTON ((TheStreet) -- So I see that Wall Street has a man at the White House -- William Daley, a former Commerce Secretary, Chicago politico and, above all, a top executive of JPMorgan Chase (JPM).

What a fortuitous choice! What timing!

I say that because two seemingly unconnected bits of news have been floating around the ether in recent days, but to me, when you link them together, they show the kind of horror show that financial regulation--and the White House approach to Wall Street-- has become.

They also point to a solution, one that's not happening, but a solution nevertheless.

The first bit of news is barely worth mentioning. Remember financial reform? You know, the Dodd-Frank legislation, which sets up a Consumer Financial Protection Bureau under the Federal Reserve, beefs up the power and budget of the Securities and Exchange Commission, and places new restrictions on banks and derivatives? Well that's on life support, if not already dead.

You can thank Congress, specifically Congressional Republicans, for doing that, by passing a stopgap spending law that freezes the SEC budget, making it impossible to write the regulations that are needed to bring much of Dodd-Frank to life. Last month, Republicans in the Senate blocked an omnibus spending bill that would have raised the SEC's budget by $1.3 billion, or 18%, while commodities regulators would have gotten a 69% increase. Thanks to Republicans on the Hill, Congress isn't increasing their budget by a nickel. The stopgap spending bill expires in March, but it will take World War III to get another nickel for regulators. Shady companies, stock scamsters and philandering banks all need to say in unison, "Thank you, Senate Republicans!"

The other bit of news that I had in mind was a sizable FINRA arbitration award against Securities America, a unit of Ameriprise Financial ( AMP), which was slammed with $1.2 million in damages for allegedly selling a fraudulent private placement in something called Medical Capital. The lawyer pursuing the case says he has got dozens of other aggrieved investors lined up, and Securities America, of course, denies wrongdoing.

It may not seem that way, but these two bits of news are tightly linked. See, it all has to do with a fundamental question that has bugged me for a long time: What does the ordinary investor do when our regulatory-Congressional apparatus seizes up like a lawnmower with an oil leak? Regulators have hardly been distinguishing themselves in the first place, and the Congressional end of the equation is back to business as usual, with the emphasis on "business."

It's not just that the House of Representatives is now in the hands of its Republican members, who voted en masse against Dodd-Frank in the first place. It's that they're using their mandate to joyously, happily march backwards into the tar pit of deregulation. The other day, it was reported that Darryl Issa, the new chairman of the House Oversight and Government Reform committee, wrote a letter to 150 trade groups, right-wing think tanks and companies, asking them to identify federal regulations that might get in the way of commerce. Here's a list, thanks to The Hill. Right up there with Ford ( F), ExxonMobil ( XOM), General Electric ( GE), with Caterpillar ( CAT), with Monsanto ( MON) and the Fertilizer Institute are the most vocal opponents of financial services reform: the U.S. Chamber of Commerce, Financial Services Roundtable and Heritage Foundation. I'm sure they'll have plenty of great ideas.

Since Congress has all the potential of Bikini Atoll after the A-bomb, the battle ahead is going to be fought in the Federal Register, which is where the SEC was supposed to publish the enabling regulations that were going to bring Dodd-Frank to life. But you can't do that when the SEC doesn't have the staff needed to write those regulations. So let's give a big round of applause to Senate "majority" leader Mitch McConnell, for doing such a great job of single-handedly strangling the SEC and thereby destroying Dodd-Frank. That's right, majority leader, under Senate rules that give the Republicans minority a veto. I'm sure that House Speaker John Boehner will do his bit in the months ahead, now that both houses of Congress are under Republican control.

When a similar situation arose in the Old West, when the civil authorities were distant or fled at the first sign of danger, like the judge in High Noon, the good citizens of the territories took the law in their own hands. Posses were formed. Guys like Rooster Cogburn were hired. Bounties were offered. Today we are less civilized, so we sue. The big arbitration against Securities America is part of that grand American tradition. You may be interested to know that the SEC hasn't taken action against anybody associated with Securities America since 2004, including the broker named in the arbitration. But apparently private attorneys, with their financial motive, have no problem making a case.

So I have a suggestion to the congressional Republicans, U.S. Chamber of Commerce and the other powers in Washington: Why not set loose the forces of the free market? Why not give bounties to the attorneys and plaintiffs who successfully sue banks and brokers? Why not reimburse them for their attorney fees? While you're at it, why not get rid of the arbitration system and allow plaintiffs to sue in court?

No, it's not happening. Of course not. The free market only matters to these people when they benefit corporations, not little guys hurt by corporations. But as they say in the old song, I can dream, can't I?

Gary Weiss has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, "The Mob on Wall Street," which exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond-trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Porfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book "Born to Steal" (Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s. "Wall Street Versus America" (Portfolio: 2006) was an account of investor rip-offs. He blogs at garyweiss.blogspot.com.

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