A lot of people complain when a governmental body, made up of professional men and women who cannot possibly know about all of the industries that they are called upon to regulate, makes rules to govern businesses it doesn’t understand. It’s not a perfect system. Somewhere along the line, someone realized this and made a suggestion that probably sounded really good at the time. If our elected representatives didn’t know enough to govern certain industries or issues that needed governing, why not set up a department of professionals who could do it for them, a bureau that would specialize in that area. We could have one for defense, treasury, education, even housing. Nice idea, in theory. Today, when someone mentions bureaucracy, however, it’s never a positive reference. Bureaucracy, it turns out, is evil. While there are plenty of good folks working in government jobs, there seem to be inherent barriers built into the system that effectively filter out any effort that rises above some very low threshold, making it almost impossible to produce above-average results regardless of the amount of funding thrown at a bureau. Not that there’s ever enough funding to expect anything more. So why is building out the bureaucracy the only tool in the US legislative tool box? Lawmakers on Capitol Hill have now finalized new financial reform legislation and sent it to the president to sign. When he does so, he’ll create a new federal agency, the Consumer Financial Protection Bureau. Like the other agencies in the federal government, this bureau will likely only have access to information critical to its mission, which in this case is your financial information. It will be years before all of the problems with this come to light. …I have tried three times to write a paragraph that succinctly explains how bad an idea I believe this to be and cannot get it done, so I’ll move on. I hate it when people complain without offering a real solution in the place of whatever has them riled up. I hear so many people talking about “burning down the system” like it’s actually an option. It’s not. The system itself must survive. I’m just not sure all of the players within it need to. I suppose, if we really wanted to see some change in a hurry, we could accomplish it by taking the next $550m settlement offer a Wall Street firm tosses across the table to the Securities and Exchange Commission (SEC) and treat it a bit differently. Financial reform might be a lot easier if big companies didn’t think that the cost of making $13bn was half a billion. I mean, how many times would you hand the federal government half a billion if it let you keep $12.45bn for yourself? I’d probably do it until my arms fell off. No, a better approach might be to take an offer like that and look at it closely for a moment, as if you were seriously considering it, and then throw your head back and laugh long and hard. Then, after you’ve wiped the tears from your eyes, gingerly hand the paper back, as if it were printed on gold foil (and it might be, given some of these companies), and then utter these words: “I’m afraid we’re going to have to make an example out of you. Just so another big firm doesn’t think they can mislead investors into buying products that are designed to fail, you understand. It’s just a lot easier for us to take all of your money than it is to spend billions of taxpayer dollars on a new federal agency that will just make things more complicated and probably not protect anyone anyway. We’re sure you understand that it’s nothing personal.” Then, when journalists write about the settlement, they mention that it’s the biggest in SEC history, but don’t really talk about how its a drop in the bucket compared to what the company made last quarter. Or that the new one-off UK bank tax cost more than this one-off penalty. They’ll just write, “Remember Sodom and Gomorrah? Well it happened again today on Wall Street.” I bet it wouldn’t have to happen very often. It won’t happen at all, of course. But some very interesting things will happen over the course of the next two years or so. With sweeping legislation always come unintended consequences. It will be interesting to see how the industry copes with them. Rick Grant is veteran journalist covering mortgage technology and the financial industry. Follow him on Twitter: @NYRickGrant