You’re going to read a lot about how the financial-reform bill agreed to by Congress this morning is “historic” and the “most sweeping since the Great Depression.”

The press loves superlatives like that because reporters love to think they’re part of history in the making—you know, the first draft, and all that. Also, they sell papers.

And while it’s probably the “most sweeping,” it may not be the most impactful. Deregulatory reforms were historic, too, with disastrous consequences surely more important than any upside from the current bill. It’s no time to forget Gramm Leach Bliley and the Commodity Futures Modernization Act (thanks, Phil!).

In this case, it’s worth focusing on what the bill doesn’t do. The Washington Post’s headline gets at that:

Financial overhaul leaves Wall Street mainly intact.

Bill does not break up the nation’s largest firms; ”Volcker rule” on derivatives was softened in response to lobbying from banks.

Huffington Post reporter Shahien Nasiripour writes this:

After nearly 20 hours over two final days filled with backroom dealing, House and Senate negotiators struck a grand compromise to merge the two chambers’ competing bills to reform the nation’s financial system in a party-line vote. But the long hours of closed-door meetings also appear to have fulfilled Wall Street’s greatest wish: Many of the measures that offered the greatest chances to fundamentally reshape how the Street conducts business have been struck out, weakened, or rendered irrelevant.

After sinking the world economy and causing trillions of dollars in losses in order to enrich themselves far past the point of obscenity, Wall Street should be relieved. When Lloyd Blankfein supports the bill, you know it can’t be that much of a threat to the Street’s interests.

For instance, here’s how the Post puts it:

Although it would not fundamentally alter the shape of Wall Street or break up the nation’s largest firms, the legislation would establish broad new oversight of the financial system.

Indeed, the Volcker Rule appears to have been watered down to the point of irrelevance. The Times quotes analyst Dick Bove on the bill’s limiting hedge-fund investments to 3 percent of its core capital.

“Who cares? They don’t put more than 3 percent anyway.”

And here’s the HuffPo on the other part of the Volcker Rule that went down:

As for the measure’s proposed ban on banks trading with their own money, also known as proprietary trading, the agreed-upon provision calls for federal financial regulators to study the measure, then issue rules implementing it based on the results of that study. It could be anything from an outright ban to a barely-there limit.

The Lincoln Amendment, which would have forced banks to spin off their lucrative (and dangerous) derivatives operations, also was heavily watered down:

Under the agreement, reached late Thursday, banks would continue to be allowed to deal interest rate and foreign exchange swaps, “credit derivatives referencing investment-grade entities that are cleared,” derivatives referencing gold and silver, and the firms would be allowed to hedge “for the banks’ own risk.”

Basically, Wall Street has shrugged off any efforts at fundamental reform. They were far too big to fail before the bill and they’ll be far too big to fail after it. The scale of the reform hardly matches the scale of what’s gone wrong.

The coverage ought to reflect this.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.