"Countrywide Chris" Dodd introduces financial "reform" bill
In an apparent attempt to get one last piece of financial market destruction (as if his championing, along with Barney Frank, of Fannie Mae and Freddie Mac hadn’t done enough damage), Senator Chris Dodd proposed over 1300 pages of financial regulatory “reform” yesterday, abandoning any pretense of bipartisan cooperation.
Dodd’s work carries on a consistent Democrat theme: Big is bad, except for Big Labor. Big Insurance is bad. Big Energy is bad. And now Big Finance is bad.
Dodd’s bill would allow the government to break up large healthy financial firms if some unelected bureaucrat thinks the firm could some day pose a systemic risk. All this after we watched the destruction of Lehman Brothers, one of the most interconnected firms on Wall Street, happen with almost zero ripple effect that would be noticeable to the average citizen or the economy.
Dodd’s bill increases the power of the Fed to regulate large banks. Let me make this clear: This is a terrible, terrible idea. The Fed must, to be credible, remain in all aspects as free from politics as possible. Bernanke has already presided over far too much politicization of the Fed. The last thing we need is an area as politically explosive as the regulation of large, politically powerful banks being put in the hands of the Fed.
In effect, the bill penalizes a firm for becoming successful. It also directly attacks firms which make money from proprietary trading, i.e. trading and risk the firm’s own money. If there is anything good to be said here, it is harkening back to the parable of the frog and the scorpion. Goldman Sachs would be one of the biggest victims of this law…and they’ve been one of the biggest supporters of Democrat politicians, including The One and Chris Dodd. If their anti-capitalist politics come back to damage their profitability, it would be hard not to see a little karmic justice involved. Unfortunately, the cost to the nation is too high to let that tidbit of pleasure cause me to support Dodd’s latest government power grab.
Dodd also plans to set up a Consumer Financial Protection Agency, something which would almost instantly become a massive conservative (in the sense of opposing innovation) sclerotic bureaucracy which would accomplish little of benefit but come at great cost, both direct and indirect. As if the concept of CFPA isn’t bad enough, Dodd wants to make it a division of the Fed.
Chris Dodd is a perfect example of a politician with little grasp of reality and a huge desire for a legacy with his name on it. Now that he’s decided not to run – knowing he’d probably lose, in part because of his apparent corruption in getting a sweetheart mortgage deal and his involvement in the real estate bubble which became the financial panic and collapse of 2008.
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