The 75th anniversary of Bretton Woods … and Atlantic City

The Bretton Woods conference, which established the International Monetary Fund and the World Bank, was held from July 1-22, 1944 and remains widely known today, 75 years later. Far less known is the smaller conference that immediately preceded it in Atlantic City, New Jersey, from June 15-30, 1944. Only 15 countries attended, as opposed to 44 at Bretton Woods, and the conference was closed to the press, whereas at Bretton Woods dozens of journalists were present. Not much has ever been written about the Atlantic City conference, in contrast to a number of books and hundreds of articles that have examined Bretton Woods and its legacy.

To commemorate the 70th anniversary of Bretton Woods, in 2014 the Center for Financial Stability held a conference in the same location, the Mount Washington Hotel in Bretton Woods, New Hampshire. The conference featured papers that can be found elsewhere on the CFS Web site and the presentation of The Bretton Woods Transcripts, a book of previously unpublished conference material that I edited with Andrew Rosenberg and that the CFS published.

For the 75th anniversary, the CFS later this year will issue a book edited by me and Gabrielle Canning, a young scholar who, conveniently, is my neighbor. The book, Just before Bretton Woods: The Atlantic City Financial Conference, June 1944, collects American and British archival documents that present a detailed picture of what happened at Atlantic City. The Atlantic City conference developed the draft agreements for the IMF and the World Bank from which the Bretton Woods conference proceeded. It is accurate to say that Atlantic City made the World Bank possible. Whereas there was already an internationally agreed statement on the principles to govern the IMF before Atlantic City, no similar statement existed for the World Bank. At Atlantic City, the two leading delegations, from the United States and Britain, found that their ideas about the Bank were close enough to assemble quickly a draft that was also broadly agreeable to the other countries present.

SEC Commissioner Hester Peirce Says SEC Will Closely Monitor Reg. BI Implementation

SEC Commissioner Hester M. Peirce urged critics “to take a fair look” at what Regulation Best Interest (“Reg. BI”) says before “proclaim[ing] it a success or failure.” She expressed the “agency’s commitment to monitor the [new rule] to ensure that investors in all income and wealth brackets are able to choose either a broker-dealer or an investment adviser.”

In a statement at the Open Meeting on Reg. BI and Related Actions, Ms. Peirce emphasized that there is more work to be done to ensure that the regulation helps investors without inflicting an unnecessary regulatory burden on broker-dealers. She asked firms to keep the SEC informed of any challenges or issues that arise throughout Reg. BI’s implementation. For example, Ms. Peirce raised concerns about small firms and broker-dealers who may be forced to change their names or registration status as a result of Reg. BI.

Ms. Peirce cautioned that the “very ambitious” compliance period will require firms to start their implementations immediately. Ms. Peirce said that the SEC should monitor Reg. BI’s implementation to ensure that, among other things, it does not exacerbate the trend of declining broker-dealers.

Additionally, Ms. Peirce noted improvements in the final Form CRS Relationship Summary and suggested ways to make disclosures more accessible. Specifically, Ms. Peirce encouraged the SEC to utilize online platforms and move away from paper-based documentation.

STEVEN LOFCHIE’S THOUGHTS…

Commissioner Peirce’s statement, while strongly in support of Reg. BI and the related rulemakings, nonetheless raises the issue as to whether the new requirements put further downward pressure on the full-service broker-dealer business model for retail investors. While it is certainly important for the agency to monitor the implementation process, and then determine whether the rule is properly calibrated to preserve the full-service business model, the practical reality is that if the rule has gone too far and materially damages the model, the damage done will likely not be reversible. It will take years of watching for the SEC to make any judgment as to the effect of Reg. BI on the full-service model (and any such judgment will be inherently subjective) and then it would take years more to make any rule revision. Businesses are much more easily destroyed than they are created.