TMA Poll: Don't Bank on a 'Turnaround' with Financial Reform

CHICAGO, July 22 /PRNewswire-USNewswire/ -- Congress passed the most sweeping financial regulation legislation since the Great Depression, but most turnaround professionals surveyed predict the effort to rein in financial institutions will have little effect because most will find ways to skirt the new rules. 

While nearly 60 percent of those responding to a Turnaround Management Association Flash Watch Poll doubt the legislation will have substantial effect, almost 30 percent expect the legislation will harm financial institutions by substantially decreasing their profits. Just under 10 percent of respondents said the legislation will have appreciable effect only when the next crisis emerges and five percent said it will decrease profits only somewhat.

"The legislation is still open to very broad interpretation by the regulators," said James B. Shein, Ph.D., professor of management and strategy at Northwestern University's Kellogg School of Management. "If those to be regulated influence the regulators' decisions, such as happened in 2008, they may not avert the next crisis." 

Knit together in fits and starts on Capitol Hill, the legislation aims to curb what critics call the freewheeling ways of financial institutions that caused the financial collapse of 2008. The bill President Barack Obama signed into law this week creates consumer protections in financial dealings, toughens rules for complex financial instruments, and allows the government to take over and break apart firms whose failure would wreak widespread economic havoc. 

Of TMA members surveyed last week, 55 percent said the financial overhaul bill will make it more difficult for businesses to obtain credit and just over one-third of those responding expect no change from the current climate for business credit. Opinion was split equally at five percent for those who think credit will be easier to obtain and those who are not sure.

"Banks have been holding off doing anything until the bill was passed," said Raymond M. Neihengen, a consultant with MorrisAnderson in Chicago. "Now they have some idea what the rules will be." 

"Let's trust that lenders, traders and regulators have learned from this experience and will be guided toward more sensible practices by a combination of prudence and reform," added Tony Natale, a certified turnaround professional and president of Shepherd Partners Inc. in Chicago. 

Chicago-based Turnaround Management Association (www.turnaround.org) is the only international non-profit association dedicated to corporate renewal and turnaround management.

SOURCE Turnaround Management Association