Without going into a lot of detail, the bill was one of the most heavily debated between the parties in both houses of Congress. All the politicians knew they needed to produce some sort of regulatory reform to satisfy the public in the wake of the financial meltdown of 2007-2008. But whatever legislation that was proposed by the House and Senate finance committees was heavily lobbied by the banking and insurance companies, who wanted to limit any additional regulation.

A lot of the members of the finance commitees in both the House and Senate were very well "taken care of" by the financial industry lobbyists. As an example, each member of the Senate finance committee received at least $1 million in campaign contributions from bank lobbyists. Chris Dodd, the chairman, received over $4 million!

The result was legislation which the politicians could claim improved the regulation on banks and financial institutions, but was a crazy quilt of overlapping and inconsistent new regulations and inadequate regulatory staff to apply them. The smaller banks have already begun to cite their inability to afford the staff needed to satisfy the new regulatory regime and the big banks have already testified before Congress that the significant additional cost of the regulations will have to be paid by bank customers. Do you recall reading of the new $5 per transaction fee that several banks are applying to transactions funded using cash cards? That's just one additional source of income the banks are using to pay for the heavy, new regulatory environment.

But more importantly, the Congress or the federal regulators are simply not smart enough to make the new regulations work as intended. Remember all the blah-blah-blah about limiting the bonuses of bank employees, particularly the ones involved in creating and selling many of the new and hugely profitable financial derivative products? The banks argued that if they couldn't pay "market" compensation, those people would resign and set up the business within unregulated host companies. In some cases that happened. But in a lot of cases, the banks found that by setting up independent "unaffiliated" companies that would employ the high-flying investment bankers, then simply contracting those same people who used to work for them as "consultants", they were able to escape the bonus restrictions of the new regualtions. In many cases the employees never even left their offices in the bank buildings. It took the banks about a week to figure out a way around the new bonus regulations contained in the regulatory reform bill passed in the last Congress. Like I've said, trying to have bureaucrats and politicians regulate potentially insanely profitable businesses in the financial industry is an intellectual mismatch.

So why don't I like the regulatory reform legislation?

• Because it won't work
• Because it adds unnecessary costs which will be passed on to the public
• And because it will encourage a sense of confidence in new regualtions which is badly overestimated and misplaced.