Congress Passes Financial Reform


The ChainLink team hypothesizes on the potential impacts to Supply Chain investments.


Sorting through 2300 pages of the new Financial Reform Act is not anyone’s forte, but the sheer effort of getting this bill and the plethora of other radical legislation passed had Washington catching its breath and rethinking the legislation agenda that they won’t do next – such as cap and trade/clean energy.

But financial reform, though it may make borrowing safer, is raising the bar for the criteria for borrowing. It appears that, though that cost of capital for individuals will be unchanged, for small business it will change. So, it does not appear to help emerging business, which needs to invest in capital, inventory, investments that cannot be depreciated, or consulting type services. An interesting opinion piece from the Fort Worth Business Press by Mary Ward, who is President of the Government Affairs Division for Southwest Securities FSB, makes the case that local banks will not be aided in their ability to help their small business customers. However, we have seen that once new government agencies are formed, they then have to go about setting up the rules by which they will manage their departments — which can, and often does, amend or reform the fine print on legislation. It will take some time to see how, in practice, things will actually turn out.

We just witnessed some minor flurry of market drops, which may be much ado about little, since (at the writing of this article), according to Bloomberg, “Gross domestic product rose at a 2.5 percent annual pace after increasing at a 2.7 percent rate in the first three months of the year, according to the median estimate of 68 economists surveyed by Bloomberg News before a July 30 Commerce Department report.” Headlines were a cooling economy, while we actually had growth.

Also, says Bloomberg, “That spending on equipment and software contributed 0.7 percentage point to growth in the first three months of the year.“

A report from the Commerce Department on July 28 shows that orders for goods meant to last at least three years increased one percent in June, the sixth gain in seven months, according to the survey median from Bloomberg.

Small steps forward, but the economy is still nervous. So the White House is still looking for more ways to stimulate the economy and create jobs (See video of WSJ’s Jerry Sieb interviewing Rahm Emanuel).

Congress and the White house are looking for ways to increase US exports, which certainly would be a big boon to the economy, probably like no other goal. Though vague in many ways, our best hope is probably the National Export Initiative. An active Commerce Department, champion and deal maker with a view toward stimulating US business, is the best hope for US business that manufacture and employ in the US.

To view other articles from this issue of the brief, click here.

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