The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism (Final, Part 4)

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Wed, 08/18/2010 - 11:28 | 528161 alexwest
alexwest's picture

I wonder this guy 'Econophile' is he really idiot?

...
It is interesting that the Republicans tried to introduce provisions in the Act that would reform Fannie and Freddie. But Barney Frank blocked this reform:
..

 or he assumes cause he writes for my fellow Americans only , they're idiots and nobody will check / know facts..

dear ''Econophile' I understand you don't like OBAMA, Barney etc etc.. I understand you think Democrats is 
THE REASON for everything is bad in USA.. but why you even didn't consider USING HEAD & LOGIC in your writing..
you know round object that can be used for thinking before/after munching next McDonald.. 

here's the facts .. Mr. Frank heads committee only from 2007 ( 1 year away from fin crisis).. 
since 1995 committee was headed by 2 REPUBLICAN guys.. see ttp://en.wikipedia.org/wiki/United_States_House_Committee_on_Financial_Services

so ,my point is don't you think is NOT Mr. Obama's democrats, Mr. frank's fault ?? 
don't you you think previous administration has some something to do w/ current ongoing crisis in housing , at least ??

good luck
alex

Wed, 08/18/2010 - 12:43 | 528389 Econophile
Econophile's picture

Why do you assume I am a Republican? I detest both parties equally. Well, perhaps Democrats more since they generally believe more in the Nanny State.

Tue, 08/17/2010 - 11:12 | 525951 Winston Smith 2009
Winston Smith 2009's picture

Post moved.

Tue, 08/17/2010 - 10:46 | 525902 old_turk
old_turk's picture

Thank you very much for doing the heavy lifting.

 

And I agree, they bought the time dearly for an opportunity to fix at least some of the more egrious issues but the solutions, such as they are, will not achieve anything of merit.

Tue, 08/17/2010 - 10:19 | 525821 Cognitive Dissonance
Cognitive Dissonance's picture

Thank you for your huge effort. It is, and was, much appreciated.

Tue, 08/17/2010 - 09:38 | 525719 crzyhun
crzyhun's picture

Good job. It shows what a little effort can produce done by the common man- not an Ivy league type economist. Of course, whose to say what your bona fides are. Nervertheless....

Tue, 08/17/2010 - 09:14 | 525656 Moonrajah
Moonrajah's picture

Thank you for a wonderful series. Thoroughly enjoyed it, and yes, it goes better with a side dish of the recent Taibbi articles about the inception and birth of the Dodd-Frank monster lovechild.

"Where is the beginning of the end that comes at the end of the beginning?" (C) Kozma Prutkov

Tue, 08/17/2010 - 08:53 | 525615 LeBalance
LeBalance's picture

EP, in your first part you indicated a PDF link for the series enmass would be forthcoming.  I would be very interested in that if you still plan on issuing it.  Thank you for digging into Donk.

Tue, 08/17/2010 - 10:21 | 525826 Cognitive Dissonance
Cognitive Dissonance's picture

The very last sentence in the article, easily overlooked, directed you to this link. I for one have come to appreciate the portability and flexibility of the all-in-one .PDF file.

http://dailycapitalist.com/downloads/doddfrank.pdf

Tue, 08/17/2010 - 08:32 | 525597 Amsterdammer
Amsterdammer's picture

Great series of articles, that anyone interested

in the subject should complement with the two

very good pieces written by Matt Taibi's two articles 

on the 'horse trading' and lobbyist's gaming of the

proposed amendments of the bill.

As both S.Johnson and Yves Smith pointed out, the

final bill does not eliminate nor really curb 'systemic

risk', which one could think would have been one of the

primary goals, if your country had another Treasury

Secretary....

Tue, 08/17/2010 - 07:30 | 525548 MarketFox
MarketFox's picture

Quoted:

The problem with this kind of regulation is that new laws are always looking backward in an attempt to prevent the last bust from happening.

......................................

The above says it all....and is the sole reason that politics are bad economics and prescriptions....

The only way to minimize politics ....IS TO MINIMIZE THEIR MONEY AND POWER....

......................................

It is also imperative that the cost of government be no greater than 10 to 15%...because taxes and legal largesse are always reflected in prices....

.....................................

To look forward...the simplest way to do this is a 15% consumption tax....and the elimination of individual and corporate taxes....

......................................

Furthermore the problem is the enabling of an economy that will grow much larger than it is...and be better distributed than it is...

So the question becomes this....

Which of the following two economies would be much larger in 10 years ?

1) Current and proposed tax system

2) A simple 15% consumption tax....no other taxes...

The revenue from a simple 15% consumption tax would dwarf the tax take from the current system many fold...and the economy would be many times larger....

.............................

Another misunderstood point is that there are those that believe that a consumption tax would be harder on the poor....as if the poor do not pay the taxes built into current prices of all goods and services....

I can assure you that all taxes simply show up in all prices....and everybody including the poor pays them across the board....

...................................

The real issue here is to grow the economy such that more people can have jobs.....and a sole 15% consumption tax ...would do just that.....producing an economy many times the size which is now being constrained by the current tax system....

 

Tue, 08/17/2010 - 08:00 | 525574 Sean7k
Sean7k's picture

A 15% consumption tax is a tax against the poor and middle class. How about a 15% tax against corporations and those with incomes in excess of 200,000? Since the majority of government costs go to protect the property of the elites- they should be the ones that pay for that protection. 

Prices are set by supply and demand in the markets. Taxes are only included if the demand for the good is enough to allow the producer to include it. That type of statement ignores reality. It is pure propaganda. 

The elites use a smaller proportion of income for consumption. Thus, a consumption tax favors the wealthy. 

Better yet- no taxes at all. Minimum government and the dramatic downsizing of the military industrial complex to simple defense of the US proper only.

Great piece, Thanks for the hard work.

Tue, 08/17/2010 - 09:07 | 525612 MarketFox
MarketFox's picture

Incorrect....

Taxes are a portion of all prices....

All the forms of taxes....The Fed tax is not separated out for the poor or middle class....

.....................

However....you like most commentors miss the main point....

....................

The goal is to increase the size of the economy....such that more middle class and the poor CAN have jobs....

.................................

Look in the mirror and think for yourself....

..............................

Which tax structure would allow for a much larger economy ?

1) 15% Consumption tax only

 

2) Current and proposed tax structure....

.............................

What if America woke up tomorrow ....never to file any sort of tax forms whatsoever....never again....

And in return received an economy whereby prices were lower....and jobs were plentiful ?

...................................

Ask any businessman....or individual which they would prefer....

And better yet....ask any businessman....which system would provide for a much larger economy....

...................................

But that's ok pal....

The likes of Summers....Bernanke....every politician....are more likely to share your point of view....and already have....

This is why the US has the current problems that it has....and will continue to have them....Lots of intelligent individuals have totally missed the boat on this one....

 

Tue, 08/17/2010 - 09:32 | 525701 chrisina
chrisina's picture

Let's see:

consumer spending is 70% of GDP

15% consumption tax means 10.5% of GDP as Govt revenues.

Current Govt spending is Federal 24.8% of GDP + states and municipalities 5% ie 30%.

How do you balance a budget with 10% of GDP in revenues and 30% of GDP in expenditures?

If you wanted to balance budget with current level of expenditures you'd have to charge a consumption tax of 43% and not 15% (43% of 70% of GDP = 30%)

Moreover a consumption tax hits far more the poor and middle classes than the rich. Ask someone who makes less than $3000 a month if he'd like to see a 43% tax added to everything he buys. 

The problem is obviously not the tax structure, but the level of spending of government.

I agree that the current tax code is far too complicated but a flat consumption tax is even worse, and your assumption that it would generate a much larger economy is without merit.

 

Tue, 08/17/2010 - 09:39 | 525717 MarketFox
MarketFox's picture

Nope...

I agree that the current tax code is far too complicated but a flat consumption tax is even worse, and your assumption that it would generate a much larger economy is without merit.

..........................

Everyone pays the Fed tax through purchases...

And the fact is that the US already has a progressive consumption tax....

People have to earn different levels to buy the same products...

ie 

toothpaste

$1.00

$1.10

$1.20

$1.38

Now apply this across the board....

..........................................

All product prices contain Fed taxes....they are just not separated out and renamed....

If a poor, middle, or upper class buyer buys something....they pay for more in taxes than the price describes.....

Look in the mirror ...and think about it....

................................

And the economy of a 15% consumption tax....no other taxes would dwarf the current system's economy....

Go do a little more homework on this one....

Tue, 08/17/2010 - 09:49 | 525748 chrisina
chrisina's picture

as I said, a 15% consumption tax generates 10.5% of GDP in Govt revenues. With current Govt spending at 30%, you get 20% deficits every year, ie a Govt debt that increases by 200% of GDP in a decade. You must be joking.

With current level of Govt expenditures, it would have to be a 43% consumption tax. You think that would improve demand for products and services?

I repeat : the problem isn't the tax structure, but the level of spending of government. 

 

Tue, 08/17/2010 - 10:10 | 525797 MarketFox
MarketFox's picture

Exactly...

But the issue is this....

The current structure suggests the cutting down of more trees in the orchard while demanding more fruit....This ends badly....

...............

There must be an allowance for the replanting of the orchard....and the actual expansion of it....

...................................

The previous commentor seems to have an even better idea than the consumption tax....

ie ...a small monthly tax on all money....collected by the depository....

This would be even broader based...and more efficient....

No more tax forms...individual or corporate taxes period.....

.............................

And absolutely correct....part of the equation is to mandate a much smaller government portion of the economy.....1000% correct....

Tue, 08/17/2010 - 09:16 | 525661 MurderNeverWasLove
MurderNeverWasLove's picture

Consuption tax?  What's so evil about consumption that we ought to tax that?  Almost  as bad as taxing income and profits.

 

The only sort of reasonably fair tax I've come accross is the APT tax.

 

If we sum up the "value of transactions" that went into squeezing a mere $15T in GDP, we'd find that number to be around $4Q.

 

How about no taxes, and a tiny fee on the use of money.  You say 15%, and Dr. Fiege says 0.24%.

http://apttax.com/faq.php#pie

More current figures can be estimated from:

http://www.bis.org/publ/cpss88.htm

 

 

Tue, 08/17/2010 - 09:32 | 525702 MarketFox
MarketFox's picture

A tiny fee on the use of money could be very interesting....it would certainly be the simplest....and most broad based.....

Good point....

........................

Perhaps a constitutional max of 5%...which would be cumulative for state and fed....

........................

Some third world countries do this with checks...but do not include the cash portion....

.......................

Perhaps a monthly take on all savings ...cash....any deposit form ....in all banks...ie 41 basis per month....

The caveat being....who would keep money in a bank....unless interest was over 5%.....

 

Very interesting idea and premise....

Certainly better than what is being done currently.....and perhaps much better than a 15% consumption tax....

 

Congrats to you.....

I really like this idea....

 

Tue, 08/17/2010 - 18:57 | 527212 MurderNeverWasLove
MurderNeverWasLove's picture

Thanks for your thoughts.

I personally think a suitable MAX would be 0.5%.

Let's say half the economic activity flees or dies off, only leaving a taxable base of $2Quadrillion.  That's $10 Trill for the budget.

You completely got why I think this is the most fair.  When there is no value judgement on anything--no exemptions--then no distortions/social engineering by polititians looking to hand out favors.

Perhaps a monthly take on all savings ...cash....any deposit form ....in all banks...ie 41 basis per month....

The caveat being....who would keep money in a bank....unless interest was over 5%.....

But so long as money was sitting in an account somewhere, it wouldn't incur the fee.  The fee only happens when the money moves.

So savings are safe from taxation.  Only when it gets pulled out and used for something else does it get taxed.

It's a new spin on "tax anything that moves" -- and an interesting answer to HFT?

 

Tue, 08/17/2010 - 04:43 | 525510 Conrad Murray
Conrad Murray's picture

I enjoyed this series.  Thank you and please keep up the solid work.

Bills like this are just plain shameful.  Power grabs shrouded with only the thinnest veil of feigned interest for the common man.  Those at the top are playing a very dangerous game as more and more people wake up and become educated about economics and American history.  It will be interesting to see how things turn out for the bought and paid for traitors.

The one part of this steamroller to destruction that really hits home for me is moral hazard.  I see so many disturbing trends among my peers.  I know a good deal of individuals who are on the dole for no other reason than they can be, but not realizing being out of work for nearly two years does not bolster employment prospects when the gravy train ends.  Grants for college are seen as free party money.  The student loans they take out are used for everything except education.  Credit card bills are ran up because, "Fuck it, I'm gonna file for bankruptcy".  Strange times ahead for America.

OT: I just checked out your "Reading List", and I like it.  Been through most of it, but not The Forgotten Man.  Honestly, I hadn't heard of it before.  I looked it up and it seems a worthy read.  I've been away from the economic stuff for a couple months, as I shifted into the likes of Blackstone, Mill, Hume, Locke, and the Founders.  Time to switch gears again and that will be my first read.  Also, I keep hearing about the Larsson novels, but have yet to be convinced their worth my time.  Your recommendation just may push me to dive in this winter.  Anyhow, here's to self-education and coming out on the other side of the crack-up boom intact, cheers!

Tue, 08/17/2010 - 14:05 | 526472 Econophile
Econophile's picture

Conrad:

Thank you for the kind words. And thanks to everyone who waded through all four parts. 

And, Conrad, I think you'll enjoy Stieg Larsson. And, Forgotten Man is a wonderful book.

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