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Senate Passes Faux Financial "Reform" Bill
The Senate passed a financial "reform" bill today by a 59-39 vote
which won't fix any of the core problems in the financial system, and
won't prevent the next financial crisis.
The bill doesn't include the Volcker Rule (it wasn't even debated),
doesn't break up or even substantially rein in the too big to fails, and
doesn't force transparency in the derivatives market.
Senator Feingold said:
The bill does not eliminate the risk to our economy
posed by "too big to fail" financial firms, nor does it restore the
proven safeguards established after the Great Depression, which
separated Main Street banks from big Wall Street firms and are
essential to preventing another economic meltdown. The recent
financial crisis triggered the nation's worst recession since the Great
Depression. The bill should have included reforms to prevent another
such crisis. Regrettably, it did not.
Senator
Cantwell agreed, saying:
While this bill takes much
needed steps to help prevent a crisis of this magnitude from ever
happening again, it fails to close the very same loopholes in
derivatives trading that led to the biggest economic implosion since
the Great Depression.... Throughout this debate I have fought hard
against efforts to weaken this legislation as well as to pass language
to strengthen it further. But the fact of the matter is, without key
reforms in derivatives trading, this bill does not safeguard America's
economy from a repeat of this crisis.It sets up a process for
responding the next time we have a financial crisis, but it doesn't
prevent this kind of thing from ever happening again. We have to stop
these kinds of dangerous activities. We need stronger bans on banks
gambling with depositors' money. We need bright lines - like
Glass-Steagall - that separate risky activities from the traditional
banking system. We need to refocus our financial system away from
synthetic bets and get more capital into the hands of job creators and
Main Street businesses. There are good, strong provisions in this bill,
and I'm proud of the work we did to get them in there, but I fear that
without closing the loopholes primarily responsible for this economic
meltdown, we are missing the entire heart of the matter.
Nouriel
Roubini said the bill is "cosmetic", and won't stop
the next crisis.
And as I pointed
out last month:
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 meltdownsAs 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.
- advertisements -
FAS up 10% in one day?
That's the way you doooit... This is how real fortunes are made in 'murica.
Playing the quaint naivete of those who think the World of the Masters of the Universe will change.
I think I'm gonna be sick.... you know, my problem was actually hoping the Dems would get it in their heads that if they took action based on populist outrage, they could pull out some votes in November. Alas, I hoped for too much and now The Squid's power will continue to grow and influence.. all out in the open, perfect trading quarters and tens of millions in bonuses and all. It's sad to keep being reminded that there is no justice.
But bHo said on TV this was a great bill/law and will put right what was done wrong. i see all the major networks touting this a new beginning/way and the American people win.
[sarcasm] Are you guys/gals tell me bHo and MSM are lying? [/sarcasm]
This bill will make the markets perfect for a huge shorting opportunity in the incoming months/years.
Shorts are also patiently waiting until the FASB mafia reverts mark to myth, they said the lower housing prices were a mere blip on the data and no reasons to change the prices of a market that will recover the next year.
GFJ preserving the ponzi economy some more!
Yeah, they tried to call it "fire sale" pricing for the first year or so. Now they just put their boot on our neck and laugh.
Not even a pretense anymore.
But Bloomberg said it was a "sweeping reform".
I guess they mean sweeping under the rug.
Don't worry, after the Revolution we will get a slightly better reform bill.
+1
By an other name, we call this lipstick on the pig.
Except the lipstick is on the wrong end of the pig.
Garbage in, garbage out. We elect trash-ass politicians and we get garbage for legislation.
Did anyone really expect a bill with substance?
Mr. Smith states in the first comment:
What? Another 1,000 pages of legislative fluff? So many wanted to repeal the health care legislation -- where is the outrage to repeal this piece o' crap?
NOVEMBER INCUMBENT BLOODBATH
MAKE IT HAPPEN !!!!!!!!!
Vote (early and often if necessary).
Worst. Congress. Ever.
You want real "reform," you introduce mark-to-market and sever the umbilical the banks have to the Fed.
What are these politicians waiting for? Most of them are a million years old, anyway... just do it.
ersatz reform
a smokescreen for the thieves
But We Haven't Done A Bloody Thing
All Day
We're So Sorry Uncle Albert
But The Kettle's On The Boil And
We're So Easily Called Away
Well if you don't have what it takes to enforce current laws making up new ones is your only other option... right?
Gangster government. These pukes are going to get thrown out of office.
Exactly. Our faux government will be getting real pinkslips.
Same old, same old when dealing with the banking lobby. THEY OWN CONGRESS
November incumbent bloodbath. Make it happen!
More treasonous behaviour from our politicians. Business as usual.
This Bill is Hifrigginalarious.............
Uhmmmmmmm..Now you will not be able tp purchase a home, without PROOF of you ability to pay, and documentation to back it up.
Uhmmmmmmmmm, excuse me?.I have purchased two homes in my life, and they got all that first, and a litre of my & spouses BLOOD prior to approval of loans.
Talk about closing the barn door after the horses are OUT, this is hysterical.
Very simple GW.....
What does one expect in a FASCIST STATE ?
With the best polys money can buy ?
The HOUSE is the HOUSE....
You meant to say
OLIGARCHY
n'est-ce pas?
Don't let the perfect be the enemy of the good.
You want more? Pass another bill.
"You want more? Pass another bill."
This was _the_ bill meant to address the problem. It didn't and there will be exactly _zero_ new bills to actually fix things until after the next crash, if then. This was the _one_ chance to bring about meaningful reform based upon any reform momentum originating with the last crash. That momentum was bought out as were _both_ of the major political parties. As Senator Richard Durbin (D-IL) said of the financial sector, "Frankly, they own this place."
From another point of view, this bill might be perfet.
If you want to pretend, this kind of bills is perfect.
Dont limit yourself to the good, aim for the perfect.