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Dodd Financial Reform Bill: All Holes and No Cheese
In a letter to Senate majority leader Harry Reid and minority leader
Mitch McConnell, luminaries including former SEC Chief Accountant Lynn
Turner, former Labor Secretary Robert Reich, hedge fund owner Jim
Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L
investigator Bill Black, former Senate Banking Committee Chief
Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and
others pointed out that Dodd's proposed financial reform legislation wouldn't have prevented the current crisis ... and won't prevent the next crisis.
Dodd himself has admitted that his bill "will not stop the next crisis from coming".
In fact, the bill is wholly ineffective, failing to address the core things which need to be done to stabilize the economy. See this, this and this.
As I wrote last month:
Senator Dodd is trying to push through a financial "reform" which bill won't do anything to break up the too big to fails, or do much of anything at all ...
For example, Dodd's bill:
- Won't break up or reduce the size of too big to fail banks
- Won't remove the massive government guarantees to the giant banks
- And won't even increase liquidity requirements to prevent future meltdowns
As Senator Ted Kaufman points out:
What walls will this bill erect? None.
***
Just
this week, a Moody’s report stated: “…the proposed regulatory framework
doesn't appear to be significantly different from what exists today."
***
In sum, little in these reforms is really new and nothing in these reforms will change the size of these mega-banks.
Moreover - as Simon Johnson notes - the bill intentionally doesn't have much in the way of specifics,
but just pushes off on regulators the ability to crack down on Wall
Street in the future. As Johnson notes, this is a recipe for continued
failure to rein in Wall Street:
If legislation can only empower regulators then, given regulators are only as strong a newly elected president wants them to be, the approach in the Dodd bill simply will not work.
Indeed, Democratic Congressman Brad Sherman - a senior member of
the House Financial Services Committee and a certified public
accountant - said recently:
The
Dodd bill has unlimited executive bailout authority. That’s something
Wall Street desperately wants but doesn’t dare ask for. The bill
contains permanent, unlimited bailout authority.
And as Arthur Delaney points out, the bill is riddled with carve-outs purchased by lobbyists:
"Obtaining
a carve-out isn't rocket science," said a Republican financial services
lobbyist. "Just give Chairman Dodd [D-Conn.] and Chuck Schumer [D-N.Y.]
a shitload of money."
On MSNBC Tuesday morning, Sen. Bob Corker
(R-Tenn.), a Banking Committee member who worked closely with Dodd,
said there was "no question" that Dodd's draft contained loopholes.
Corker mentioned a few hits from the carve-out list: "Private equity
firms are left out," he said. "Hedge funds are left out."
The bill is all holes and no cheese.
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Well said -- Completely agree -- one big "pageant" put on for the media. ("Bread and circuses" perhaps) In addition to regulating "angel investing", making startups file with the SEC and wait 120 days -- and other little presents that our highly paid and benefited government workers were able to slip in. But as the media tells us -they are SO smart and smooth!
This place (the US) is heading for a Grecian-style train wreck. The inmates are clearly running the asylum and most of them have worked for the government or academia their whole lives -never held a real job!
The only reason congressjerks exist is to do nothing but go about the business of blurring issues, dodging decisions, juggling figures, bending facts and otherwise obliterating the truth.
This is the way of Washington. There is no future in actually fixing a problem, as that's a one election cycle boost.
The way to permanent electoral success is to pretend to fix the problem, which you can run on for one cycle; let the problem occur again, which you can run on fixing for another cycle; if called out about not fixing the problem the first time, pull out the all purpose answer "we didn't go far enough"; and each "fix" makes the bureaucracy (your minions) bigger and bigger.
Its all kabuki theater to keep the issue alive, get re-elected, and gain more power & money by ever expanding bureaucracy. Actually solving problems is a dead-end.
Fantastic comment, TCS. I wrote it up:
"There is No Future in Actually Fixing a Problem ... The Way to Permanent Electoral Success is to PRETEND to Fix the Problem"Wow... I'm flattered!
WALL STREET UNDER A MICROSCOPE:
http://williambanzai7.blogspot.com/2010/04/putting-wall-street-under-mic...