The arrogance and ineptitude of high government officials in Washington, DC, never cease to shock and dismay me. What is most frustrating is that these officials are actually sharp, intelligent people, yet they are either unable or unwilling to look logically at all angles of an issue. It used to be that partisan bias was associated with Congress, but now it has permeated all levels of bureaucracy, including the bureaucrats who write and enforce the regulations that affect the laws passed by Congress.
A case in point is the Dodd-Frank Act mandate to the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB) to draft a rule requiring registration of municipal advisers. The purpose behind this section makes sense; it is reasonable to register those individuals and organizations which advise municipalities on the structuring of a placement of various debt instruments that those municipalities issue.
However, when the SEC and the MSRB drafted the rules, they drafted them so broadly that any person or company “advising” on financial matters must be a registered adviser. Consequently a casual conversation between a banker and a municipal officeholder about the renewal of a certificate of deposit would trigger the registration of the bank and banker.
The end result is that banks which provide deposit services, cash management, securities custody, trusteeships and short-term loans could be subject to this registration. Never mind that this detailed level of registration was never the intended result. In fact both congressional banking chairmen—Spencer Bacchus in the House and Tim Johnson in the Senate—wrote letters to the SEC and the MSRB, specifying that subjecting banks and bankers to be registered as municipal advisers was never the intent of Congress. Those letters, apparently, failed to dissuade the arrogant bureaucrats in charge.
This rule will be a burden not only to banks and bankers, who are well-regulated by many federal and state agencies, but will be a significant burden to many rural municipalities, which have limited choices of banks with whom they may conduct business.
We can only hope that common sense prevails, and soon. To date, common sense seems to be in short supply at the SEC and MSRB.