July 15, 2010 12:09 PM
S&C's Rodge Cohen: Financial Reform Bill Has 'Substantial Teeth'
Posted by Brian Baxter
UPDATE: July 15, 3:12 p.m. The Senate passed the financial reform bill in a final vote Thursday afternoon. President Obama has indicated he will sign the legislation next week.
With Senate Democrats on the verge of pushing through a financial industry reform bill in a final vote on Thursday, Sullivan & Cromwell senior chairman H. Rodgin Cohen, the well-regarded "trauma surgeon" for Wall Street's heavy hitters, weighed in on the bill in an interview with Bloomberg Television.
Cohen disputed the contention by some that the proposed Dodd-Frank Wall Street Reform and Consumer Protection Act isn't strong enough to bring about substantive reforms to the way Wall Street does business.
"This is a bill with substantial teeth," Cohen told Bloomberg. "Regulatory requirements are clearly appreciating greatly, and there is a new resolution regime. I think the administration's basic objective has been accomplished."
Cohen, who withdrew his name from consideration for a top post at the Treasury Department last year, notes that "in every 1,500-page bill...there are some very unpleasant surprises."
The Dodd-Frank bill itself is roughly 2,300 pages, and Cohen says one of the provisions that Wall Street won't like is one that "changes the assessment base for FDIC insurance, so it hits the bigger banks, in my view, in a way that is totally inconsistent with good public policy."
Cohen also dislikes the bill's prohibition on paying interest on commercial demand deposits, which he claims could cost big banks billions to their bottom lines. Still, Cohen notes there are some positive consequences of financial reform.
"If we have a safer and sounder banking system, funding should be cheaper over the longer term," he told Bloomberg.
When asked how the proposed legislation would affect Wall Street's biggest players--Goldman Sachs, Morgan Stanley, and JPMorgan Chase--Cohen acknowledged that it would have an impact on their basic business models. But he disagreed with critics who claim that Dodd-Frank creates firms that are too big to fail.
"I think this will be a change that is not revolutionary, nor should it be," he said. "Banks are a service part of the economy. If the economy is strong, then banks will be strong...Growth in the economy will cure most of these problems."Make a comment