Tuesday, November 10, 2009
I posted an 11-page summary of Senator Dodd's financial reform bill earlier today.
After receiving input from one of the top experts on credit rating agencies and various other smart people, I have now formed an opinion about Dodd's bill.
Specifically, Dodd's bill - while sounding good - is really an all-out attempt to save the current, broken system.
Dodd's bill contains a number of concepts and catch-phrases that sound like reform. But the bill would actually:
- Keep the current Federal Reserve system, even though it is a wholly-failed system (see this, this and this). True, the bill would take away some of the Fed's regulatory oversight powers, but the Fed has never used them anyway, so it is really maintaining the status quo
- Keep the current NRSRO credit rating system - maintaining Moody's, S&P and Fitch as a government-endorsed rating monopoly - even though that is a wholly-failed system
- While saying it "ends too big to fail", the bill would actually make sure that attempts to immediately break up the giant insolvent black holes dragging our economy down - such as Senator Sanders' bill - will be killed
We can go on and on, as the bill - while using a lot of nice language - attempts to prop up just about every aspect of the current system, while appointing ("trust us, we're different") regulators to oversee things. It does nothing to try to prevent future forms of looting (which Congressmen Grayson, Clay and Miller attempted to do in their bill).
But we cannot be sure that such regulators won't be subject to the same regulatory capture as all of the current regulators have suffered. Or that Senator Dodd has suffered, for that matter.
Only by taking away monopoly power from the too big to fails, and the NRSROs, and the Fed can we ever have a stable economy.
In addition, the economy cannot recovery until trust is restored in the financial system, and trust will not be restored unless the fraud behind the financial crash is prosecuted. Dodd's bill ignores past fraud.