Tuesday, April 20, 2010
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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Like the Insurance Company Indemnity Act that preceeded it so that Obama could claim to have brought the country universal health coverage, this garbage of Dodd's accomplices precisely the same purpose respecting financial reform. Never get the idea that legislation is passed in this country to benefit the people. Rather it is always passed either to achieve some self-centered purpose of its congressional or White House sponsors and/or to benefit the scum that fund their campaigns. Dodd will almost certainly pass on into a career in lobbying after his stay in the Senate is over, of course. And the only thing that will ever bring an end to this pervasive ruling class corruption will be a "peoples moment", complete with arrests and public trials for these maggots.
ReplyDeleteAndrei Vyshinsky
This lady should be appointed to the SEC.
ReplyDeleteAlleged Goldman Sachs fraud
April 19, 2010News > Money > Lang & O'Leary Exchange
Amanda Lang and Kevin O'Leary talk with Janet Tavakoli, president of Tavakoli Structured Finance, on the SEC's civil case against Goldman Sachs
http://tinyurl.com/y23x7oq
There sometimes comes a point when the Alpha wolf develops the slightest limp... and is torn to shreds. Or rather in this case, cast out to the wolves to be picked apart.
ReplyDeleteGoldman is an extraordinary Alpha dog. Enron on steroids. Yet they are also an extraordinary albatros. A tone deaf, don't know-when-to-lay-low, last-to-leave-the-party vampire squid that seems intent to rub their criminalty in everyone's faces long after it is uncool to keep kicking the corpses on the ground and everyone else already slunk off into the weeds because they heard the sirens in the distance. They are the Joe Biden of can't-keep-their-mouths-shut pickpockets.
They are rubbing the taxpayers and small investors faces in their con games. They are making their peers look bad, and the act is getting bad for business. They are embarassing their guy Obama. They are so bad they are allowing the GOP to position themselves as anti-Wall Street. In short, they have no friends anymore, just cops on the take and fellow mobsters รข€“ and that worm can turn faster than the mortgage on a southern california paper mache mcmansion. It is a possibility, remote perhaps, that the forces of gravity are slowly repositioning to leave GS all by itself out on the edge of a cliff like Wyle Coyote holding a stick of lit dynamite.
I am not saying it is happening, I am saying it has happened in the past, and this scene has many of the same recipe ingredients. Enron, the tobaco industry, various mob bosses who's names escape me. One day they are invincible, the next day they are staggering out of a restaurant filled with bullet holes or flapping in the wind at a Congresssional hearing, and the Congressmen aren't returning their calls anymore. It happens that fast.
Goldman may own the government, but they are not bigger than the government. They have made a lot of enemies and have become a liability. The envy their peers may view them with can quickly turn to opportunity to eliminate the top dog. Forces are converging with all guns pointed at GS. Do not forget that outsde the US and its media blackout bubble, the whole world views GS as akin to Hitler invading Poland.
Goldman's biggest sin is not knowing when to cool it. What's worse, they exposed the con by getting caught red handed. This may seem like no big deal back in New York where everyone assumes everyone is crooked, but out here in flyover country, I can assure you that small pension fund managers and middle age retirees don't take it as a gven that their money is fodder for rigged poker games.
Maybe that poor sack at GS will take the fall and this will blow over. Or maybe not. The natives are demanding a sacrifice. GS looks good for the part. In hindsight, it does seem like JP Morgan has been being groomed for a while to take over.
And sometimes, as with Enron, even a CEO with a Presidential nickname looks at serious jail time.
I think the language proposed by the White House, however, does shore some of this up. It talks about firms going through bankruptcy before any of the "50 billion dollar fund" is used. The mere fact that Dodd's legislation leaves the Consumer Protection Burea in the FED is a huge cause for concern. The pressure on regulators will be palpable. Overall, the entire financial reg legislation does lack some important teeth.
ReplyDelete