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.
Yes, but we get a masterful show of kabuki theatre too. In tandem with the successful passage of this bill, the energy towards meaningful reform and punishment will hopefully be greatly dissipated.
I regularly troll the comments section on other sites to check the most recommendeds as a barometer of public sentiment. Most people are seeing through this charade, with not a few pointing out the numerous conflicts of interest in the Obama White House.
But it should be enough to get them through the midterms, which is all the slimebags care about.
Anecdotally, I was in a conversation where words like ‘Abacus’ (and even ‘Goldman Sachs’, and ‘SEC’ were batted around with a familiarity and disgust that I’d not imagined possible. One of the people in that conversation had apparently spent hours reading the WSJ, FT, NYT, and other sources yesterday. (I’m only guessing, but I sure have a hunch that if I and my acquaintance are typical, the web readership stats at finance sites and journals must be showing an uptick.)
I really think that people are waking up.
The distrust of Congress expressed in that conversation was breathtaking.
I kind of have the sense that DC has been so used to ‘kabuki-p.r.’ as a way of life, that they don’t quite grasp it isn’t going to work going forward.
After Katrina, Bush went to NOLA in his denims and grabbed a hammer or something, as if the images of him pounding a nail would somehow eradicate the years of appalling neglect, plus his inability to do anything meaningful.
I kind of have the sense that Dodd thinks he can head for Wall Street in his denims with a hammer. If my anecdote is remotely ‘typical’, then Dodd and Schumer are walking straight into a political Katrina.
Gosh, I don’t understand why you are such a cynic…
I’d like to add that the COO of the SEC, Adam Storch, is a kid from Goldman. If the quality of the content and English writing on his website is any indication, he’s a moron first and a partisan hack second.
…..former Treasury Secretary Robert Reich, ….
I think the poster meant to say, Robert Rubin. Robert Reich was Clinton’s Secretary of Labor, and as near as I can tell, is one of the good guys.
With all the repuglicans opposing and Krugman supporting it what is there not to like? How can there be more than two positions in a two party system?
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.
Goldman 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 â€“ 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.
At the very least, it looks like Blankfiend is beginning to worry about his job, judging by the headline spin.
Perhaps someone can instruct this old man what the difference is between bribery of a Government person & what a lobbyist does. If both instances are intended to receive a favor to the one giving such, why hasn’t the Supreme Court of the United States ruled illegal, the act of lobbing? Both seem to have the same outcome, along with disenfranchising those individuals not of means to attain favor in their position. Also, why should those who can’t the price to attain favor, be forced to pay for the granting of such favor? Case in point, the present financial what ever you want to call it. Why are the individuals still in position to repeat that which caused this act?
If, as a great many seem to be saying, that corruption appears rampant within the Congress, then might also be the same for the U.S.Supreme Court? What of the Executive branch members? Does that old saying “scratch my back and I’ll scratch yours” now describe what is the law of the land? The silence of the Court on all the financial goings on of the past 30 years, is deafening.
“Perhaps someone can instruct this old man what the difference is between bribery of a Government person & what a lobbyist does.”
The difference is 10-20 in Federal prison.
Lobbying is basically a legalized form of bribery. It’s also why the US is probably beyond help now, on any number of critical issues.
The difference is the quid pro quo. Sort of a fuzzy difference, especially when everyone involved knows what the “donations” are for, and what is expected.
And the Supremes have ruled on the subject, more or less – corporations have a 1st Amendment right to make unlimited “contributions.”
(and by the by, the Supremes cannot just rule on any old thing; Article III requires there to be a “case or controversy” before the Court)
Well then, if that be the case, before the court that is, then why hasn’t anyone done so? There is a lot of talk, from people in & out of the financial arena, experts mostly by their admission, yet not one has stepped forward to contest? Has the spirit of what this country was founded on, really been lost?
Another question perhaps some might have an answer for; Why are all the so called experts sitting around patting each other on the back, yet are incapable either by design or fear, to simply take the next step in that used saying; If you talk the talk, then get off your ass & do the walk. You don’t seem to have any moral attitude towards sending young people off to fight the wars that benefit the corporations, but when it comes to standing up roe your so called principles, then out comes spineless reaction. Any takers?
Lawrence Lessig is working on ending corruption:
Which experts? Note – Obama ran on a platform to change the way things are done. I never believed it, but a lot of people did. Point being, if he could be elected with a mandate to change the way things are done *and then does nothing at all* that begs the question – under what circumstances *does* anything change?
Krugman has an interesting article about different ways of implementing that reform.
“Six Doctrines in Search of a Policy Regime”
The bill is all holes and no cheese? Good thing it isn’t the finished product then. Make your complaints and suggestions now because there will be financial reform.
Geez, people it’s a process.
GW, isn’t Dodder’s bill, as I’ve read elsewhere, still destined to enforced by, or rather buried under, the Federal Reserve, that oracle of foresight, paragon of supervisory oversight, and champion of the common man? If so, then except for the carte blanche on treasury bailouts, are not all other marginally positive aspects of the bill rendered effectively unenforceable single-ply toilet paper? Turning chicken coop security directly over to the fox, an unaccountable, rogue cartel, would seem to obviate any discussion at all of the bill’s specific content, and there may be no hope short of a game-changing market collapse.
Derivatives are narcotics; wall street meth dealers need to be regulated!
Now TWO complete CONgressional dingbats from Connecticut? This one’s now DODD TO ME, as ill!