Making Sense of Financial Reform
Ever since the Dodd-Frank financial-reform bill became law, I've been wrestling with what to say about it, if anything. As editor of a personal-finance magazine, I feel as if I'm expected to like the idea of financial reform -- or to protest that the bill goes too far or wish that it had gone further.
Truth is, I don't know where it's going. As I recently wrote to a reader, I'm not against regulation per se. However, it's tricky to craft rules that are effective but not onerous. The new law has the best of intentions, but with 2,300 pages and lots of blanks to fill in, it also has huge potential for a fresh round of unintended consequences. If you were already annoyed by bank fees, for instance, just wait (and read about the fate of free checking).
Plus, the law could get tied up in its own red tape. The other day I received a press release telling me about a "Notice of Proposed Rulemaking" by the U.S. Department of Education. The notice alone was 503 pages (at first I thought the number was a typo). According to one estimate, the financial-reform law requires more than 200 rulemakings.
As I've written before, another potential problem is that regulators often play a game of Whac-A-Mole, taking a swipe at yesterday's crisis when tomorrow's could spring up in new and unexpected places. One glaring omission in the financial-reform law is any mention of Fannie Mae and Freddie Mac, which together still hold billions in subprime mortgages for which taxpayers are on the hook. Or maybe the next meltdown will come from an area that's totally foreign -- think a Mediterranean country famous for souvlaki and ouzo.
The tools you need. Financial reform is now the law, so I guess I'll hope for the best (read columnist Jeremy Siegel's take on how the law will affect investors). And we at Kiplinger's will certainly keep you up to date on developments as they unfold (and on regulations as they are written). But we pledge to try not to subject readers to our legislators' lingo. We will shun such terms as "mandate," "implement" and (shudder) "promulgate." (It's so much friendlier to say "require," "take effect" and "issue.") As always, we'll give you the tools you need to protect yourselves as consumers and investors and to make smart decisions on your own (and we'll do it in fewer than 503 pages).
A case in point is the cover story. Senior editor Mary Beth Franklin, our ace retirement writer, spent hours plowing through stacks of reports and studies filled with dire predictions that many Americans either won't be able to afford to retire or will run out of money in retirement because they're not socking away enough in 401(k) and similar plans. Mary Beth's challenge was to be sober without wagging her finger and positive without sounding like a Pollyanna. "Like it or not, the 401(k) is the best retirement plan we've got, so we need to make the most of it," says Mary Beth. As usual, she does a masterful job of showing you how small steps can add up to a big leap toward retirement security.
And don't wait for the new Consumer Financial Protection Bureau to set up an ombudsman to help students who are having problems with private student loans. Read senior associate editor Jane Bennett Clark's trenchant advice on how to dig out of college debt.
P.S. No matter how much you make, you'll find valuable and easy suggestions on how to stretch your paycheck.