Tonight’s program is part two of our look at financial regulation. The first part, “Does Wall Street own Washington,” aired two weeks ago. 

During the first program one of our guests, Tim O’Neill, of O’Neill Strategic Economics, explained the similarities between the Canadian and U.S. financial system.  He said that the two financial systems are very similar in process and architecture but regulation is done differently. He went on to explain that in Canada regulation is done on the basis of principal or intent whereas there is an excessive focus on the rules in the U.S. As a result the banks hire lawyers to focus on ways around the rules.

Is it true? Do Canadians go by the spirit of the law rather than the letter of the law? Is it our culture and values that kept us safer during the financial crisis rather than regulation?

Tom Friedman's piece in yesterday’s New York Times examined the same idea. Take a look at the excerpt from the column. 

“So more and more of us are behaving by, what Seidman calls, 'situational values': I do whatever the situation allows. Think Goldman Sachs or BP. The opposite of situational values, argues Seidman, are 'sustainable values': values that inspire in us behaviors that literally sustain our relationships with one another, with our communities, with our institutions, and with our forests, oceans and climate. Of course, to counter this epidemic of situational thinking, we need more and better regulations, but we also need more people behaving better. Regulations only tell you what you can or can’t do in certain situations. Sustainable values inspire you to do what you should do in every situation.

How do we get more people behaving sustainably in the market and Mother Nature? That is a leadership and educational challenge. Regulations are imposed — values are inspired, celebrated and championed. They have to come from moms and dads, teachers and preachers, presidents and thought leaders. If there is another way, please write me."

Tonight we are going discuss the specific legislation that is on the table in Congress.  With two main focuses. First we will discuss how to shrink firms that are too big to fail and then we are going to examine the new rules surrounding derivatives.  The main goal of the financial regulation overhaul is to bring more transparency to the market and protect  tax payers from another massive bailout.

But, that brings us back to the first program we did two weeks ago.  At the end of the program 3 of the 4 pannelists agreed that poor government policy  lead to the financial crisis. But, if the president signs a law that states that all derivatives have to be traded on exchanges, or impose if he imposes  the Volcker Rule.  will the wealthy banks just hire fancy lawyers to get around the rules? 

As Friedman says, if we don’t have leaders that create value inspired rules then are we really fixing anything?