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  • Morning Bell: Bigger Government Is Not the Solution to Big Government Problems

    The final details of the financial regulatory reform bill being negotiated by Sens. Chris Dodd (D-CT) and Bob Corker (R-TN) are still being hammered out, but the underlying contours are clear: more government bureaucracy layered on top of our existing impenetrable and unaccountable financial regulatory system. Specifically, the Dodd/Corker plan reportedly still contains these elements:

    The Consumer Financial Protection Agency – There is still debate over whether this new entity will be a stand alone agency, housed in the Department of Treasury, or housed in the Federal Reserve. Wherever the new entity ends up, the bottom line will be the same: a massive new bureaucracy afforded ambiguous grants of almost unlimited power. Although intended to help consumers, the net result of such a move would be to stifle the innovations that would bring them improved, lower-cost financial products.

    Permanent TARP – Details are sketchy here, too, but reports are that federal bureaucrats, possibly the FDIC, will be given new “resolution authority” powers backed by a permanent $50 billion slush “resolution fund.” If this new power is given to the FDIC, it would be the first time the FDIC’s authority was extended beyond the banks that it directly insures. But more importantly, these provisions would establish a permanent TARP – the radioactively unpopular $700 billion Wall Street bail out slush fund.

    The Agency for Financial Stability – Sold as purely a monitoring and information gathering entity, without the proper limiting language, a new systemic risk agency could essentially draft any financial firm into the federal financial regulatory system and subject it to a wide variety of restrictions that could include compelling large financial firms to sell off portions of themselves, drop lines of business, break up, or otherwise reduce the “risk” that the regulators believe they may impose on the financial system.

    Instead of allowing for risky behavior to be properly priced by the marketplace, taken together these new bureaucracies would almost guarantee more big bank bailouts costing taxpayers untold billions of dollars. The new regulators could declare any problem with a major financial institution to be a potential systemic risk and tap into the fund to bail it out.

    There is a better solution. Heritage fellow David John explains:

    A better approach to preventing another crisis is to modify U.S. bankruptcy law to accommodate the special problems of resolving huge financial firms and to allow the courts to appoint receivers with the specialized knowledge necessary to best deal with their failure. By creating an open process controlled by an impartial judiciary guided by established statutory rules, financial firms, investors, taxpayers, and others would have the advance knowledge that large financial firms that were once known as “too big to fail” can now be closed if necessary without risking disaster. In addition, requiring all larger financial services firms to hold significant amounts of capital to cover losses would greatly reduce the systemic risk that they could pose to the financial system.

    Higher capital levels would enable many firms that would fail under today’s capital levels to survive a crisis, saving shareholders and bondholders their investments, employees their jobs, and taxpayers billions of dollars in federal bailouts. Congress and the Administration need to learn and heed the lessons of 2008, or a repeat crisis will just be a matter of time.

    Quick Hits:

    Posted in Economics [slideshow_deploy]

    44 Responses to Morning Bell: Bigger Government Is Not the Solution to Big Government Problems

    1. James McCloskey, Big says:

      Have you sent your solutions to Sen. Dodd and Sen. Corker?

    2. Duncan Druhl says:

      Druhl's Magical Inference Theory notes clearly that the secondary consequences of government activity directly chill the environment meant to be protected. This ponderous group of unchecked powers and agencies contribute directly to the lack of employment prospects in this environment merely because they are, as yet, undefined and constitute a huge potential risk for businesses and bankers. Combine this with the unknown effects of the health care sludge without resolution and the deposits of federal money in banks that they can't loan out by stipulation of the deposit agreements and we have am impending stagflation that will make Carter II the proper heir of Carter I.

      It isn't really rocket science folks. Businesses will not do what they need/want to do in an environment chocker-block with expensive risk. The administration knows this and, in Druhl's humble opinion, is using it to continue the recession. For what purpose? Only some naked guy in the showers knows…and I don't think he is prepared to give answers.

    3. Lebo, Melbourne, Flo says:

      Bigger Government is the answer? Yea sure….Trust me.

      Our Federal Government has been so successful with existing programs lets turn over health care and all financial market oversight to them also. Just look at their track record…

      Social Security; This Ponzi Scheme makes Bernie Madhoff look like a short ball hitter. It's busted.

      Medicare & Medicaid….Busted

      Post Office: Busted

      Freddie Mac and Fannie Mae? Totally Busted and at least significantly responsible for current financial melt-down.

      The Fed? God only knows what they have done with trillions. Most likely lined the pockets of their Democratic (and probably Republican) friends with gold at our expense. Will we ever know the extent of their skullduggery?

      It's the Chicago way. Our current government makes third and fourth world banana republics look good.

      These are sad and dangerous times.

    4. Shawn, Ind. says:

      pretty soon the backbone of our country (middle class tax payers) is going to break. there will be no inspiration for self advancement. and the house of cards will fall. maybe they can herd us all in areas like that movie district 9 and throw us cat food for surviva. we should be happy with that right?

    5. Joy in Tennessee says:

      I called Corker's office to protest this and the staff there had no idea what I was talking about. Not only did the gentleman plead ignorance but did so in a mocking tone as if I were the ignorant one. I am one of Corker's constituents. I voted for him. I am very regretful of that and will not make that mistake again.

    6. Mary.... WI says:

      The "Administration and Congress" DON'T CARE about advice anyone has to offer nor do they care what WE THE PEOPLE, as a majority, would like to see for our country. Welcome to the new Socialist Republic of North America. If only our founding fathers could come back and beat the cr-p out of the "Administration and Congress"…..a great day to be sure!

    7. Ken Jarvis says:

      So far, NONE of the PROMISED

      Financial Regulations

      have been put into law.

      I understand the HF and the GOP are

      AGAINST IT,

      whatever it is,

      but HOW can they be against -

      The Consumer Financial Protection Agency ?

      LVKen7@Gmail.com

    8. Lloyd Scallan - New says:

      Conn Carroll's article again is disappointing. He still does not, or cannot recongnize that Obama, and his ilk, wants no part of reducing the size of government. To the contrary, they are delibertly growing the government to unmanagementable

    9. Lloyd Scallan - New says:

      Conn Carroll's article again is disappointing. He still does not, or cannot recongnize that Obama, and his ilk, wants no part of reducing the size of government. To the contrary, they are delibertly growing the government to unmanagementable proportions. This is the system that Cloward & Piven devised

      in the '60s. To OVERLOAD our system of government to force it to collapse. This will in turn, allow Obama to install his socialist form of government.

    10. Angel, Ohio says:

      We need to Clean HOUSE and get these people out of office. I don't think we can wait until November. We need to impeach them all.

    11. bigdave, ocala fl says:

      History,which the "progressives"(the current US Administration) change at will in their attempts at mind control/ brainwashing in order to destroy "our roots and culture", offers us some insight on how best to deal with this current crop of rotten apples. The citizens of Italy new best how to deal with Benito Mussolini, the man who led their country to the brink of destruction, for his own personal gain(just like Obama). I believe they had the right idea and brought his regime to a halt QUICKLY! And PERMANENTLY! Although they have not recovered still, at least they cut out the cancer. Something to think about. The fear of God must be put BACK into the DISTRICT OF CORRUPTION…or we lose our country.

    12. Ken Jarvis says:

      TATBO – Throw All of the BUMS OUT.

    13. G W Jefferson says:

      When I think about an increase in taxes as compared to an increase in health insurance premiums if Obamacare ever gets passed, I would much rather have an increase in my private insurance. That is private enterprise that will result in an increase in jobs.

      George

    14. Robert Magill says:

      OH, WE ARE SO F—ED! ANOTHER NAIL IN THE COFFIN.

    15. Paul McCoy, Arvada, says:

      It is becoming clearer with each passing day that the current administration is on a mission to make the United states at the very least a Marxist/Socialist country with Sharia law with the help of the majority in congress. The problem isn't that they don't care, they do, but not about the governed. They care about their own agenda to bring this country to its knees with a tyrannical (they won't call it that – they will call it "sharing the wealth" or some other innocuous sounding term)government leaving the cictizenry bereft of liberty. The current so-called healthcare debacle is a prime example. Those of us (including many Constitutional scholars and lawyers, of which I am not one) who have read it find it lacking in Constitutionality, a far more important principle than the fuzzy math and arguments being used to force it down our throats. By attempting to pass this piece of legislation, the administration and congress are both refusing to care about whether or not it can pass muster as Constitutional. They only care about getting their own way. When questioned about it, Nancy Pelosi just laughed and said "are you serious?" The same applies to many other pieces of legislation being pushed these days, most of which will cost the country (read you and me) our freedom and our fortunes (read ability to survive). Stand up America. Fight for the God given (not government given) rights as described in the Declaration of Independence and the Constitution of the United States of America. If left to its own devices and agenda this administration and congress will decimate the best country in history.

    16. Blair, Franconia, NH says:

      Bigger government? Are you kidding me?! Why can't we get interstate competition and other things? We don't need Obamacare. We need Obamacare like we need a hole in the head,

    17. Susanna, Kansas says:

      I'm soooo done with these people!!! What is happening is obvious and we will pay for these self-centered, arrogant, narcissistic fools with our liberty, our savings and probably our lives. I kinda liked the reference to Mussolini by Bigdave in an earlier comment. Italy has yet to recover from his shenanigans. I may not see us recover from the current fools in my lifetime. But, I will certainly back any and all efforts – including revolution. We may have to just surround the Capital and White House, build "We the People" camps and insist they hear THE PEOPLE. Because, by gum, we aren't slaves or serfs and we will never stand for it. That's where this is heading. I think we should also take away their pay and tell them to get over thinking they are some kind of elite class – because their constituents are currently out of work and wondering if they are going to be homeless – many have already found themselves homeless. This has happened because of these fools and their agenda. Not Acceptable! These fools need to feel the same pain. They certainly should not be PAID to ruin this country! (BTW, "politicians" means "many theives").

    18. Bob Veigel, Arlingto says:

      Big government is not the solution to anything. It is the problem. In fact, it creates more problems in less time than any other organization. Do not understand why this is so hard to understand, and take action to correct.

    19. Wayne Clark Owasso, says:

      Now if we could only impose the same capital reserve limitations on the government.Why should we not impose the 'prudent man rule' on our congressional leaders as well?

    20. Carol, AZ says:

      Regarding N. Pelosi the word megalomania certainly comes to mind.

      Or is it demigod? with super human qualities.

      My only hope is that the voters from CA will get rid of her in NOV 2010

      But Angel from Ohio had the better idea.

    21. Gary C. says:

      To Lloyd Scallan,

      I've always believed in the C/P strategy as their tactic but have to ask: how would the Obama administration get a pass for presiding over the collapse?

      To Ken Jarvis who writes: but HOW can they (HF &GOP) be against -

      The Consumer Financial Protection Agency ?

      Easy, just read about it and Lebo's analysis. My question to you is why do you put so much faith and trust in gov't? You're a sap; an easy mark.

      BTW – would you intercede for me with Sen. Dodd to get me a "sweetheart" loan deal? Oh, that's right, it really wasn't found to be that but rather an agressive rate. Regardless, can I get the break he got? Just give me his lawyer.

      Gary

    22. Lloyd Welch says:

      After just over a year in office the question I have to ask is; is there no bottom to how low this administration can go? How can the bar be lowered anymore? Lies, crooked deals,threats, nothing too dirty for this administration. I had such a low opinion of Obama and his bunch to start with it is amazing that it could be lowered but, the plain truth is that it has been. We would be just as well off with Pablo Escocobar as president. I never thought I would see the day that I would be ashamed to call myself an American, but sadly that time has come.

    23. Sanford Trado, Hudso says:

      Regulation is not the answer. Less is more. As has been stated, the government cannot manage anything well. The country is in a free fall and until we get people who are willing to fight for the future of this country, we are heading for destruction.

    24. Lee White Tanks AZ says:

      Unbelievable:

      Having Chris Dodd at the top of structuring new legislation for "New and Improved" financial controls is ludicrous if not outright criminal negligence on he part of the Senate.

      PC is Thought Control

      LEE

    25. Al Smith says:

      Watch for the Chris Dodd bill that will be coming at us, The rascals are going to form a new pack to protect us from the Banks, Another expansion of the Socialist Gov. being shoved down our throats. It is coming faster and faster even as some of these so-called men quitting and leaving, To settle back and spend our money, laughing all the way to the bank, that they will control. WATCH for this new BILL.

    26. Lee White Tanks AZ says:

      Unbelievable:

      Having Senator Chris Dodd in a leadership role in structuring a "New and Improved" financial industry control system is ludicrous if not bordering on crimiminal negligence by the Senate.

      This Congress and Administration give a whole new meaning to the old Fox and the Hen House adage.

      e.g. Dodd, Schumer, Ried and Frank, Rangle, Pelosi are just the tip of the iceberg.

      PC is Thought Control

      LEE

    27. Sue From Detroit says:

      Kill the free market system. These guys know exactly what they are doing. Destroy as much as possible or can get away with for power and global domination. If I said these words four years I would have thought I was crazy. Not any more.

    28. charles fisenne bald says:

      I don't think bankruptcy codes will bring jail terms to all the predators of our capitalism business system. Stockholders, in truth, do not have protection from executive unmitigated greed nor do American workers have jobs when manufacturing skills and technology of domestic products are transfered overseas.

      There should be corporation tax breaks or penalties to level the market since prosperity of the country rests on skills and productivity, not unskilled services.

      Government jobs contracts, grants, equal a debt to be paid by a free society

    29. Russ Errett Sebring says:

      Is “one man one vote” still in effect?

      Corporations and unions “don’t have a votes” are for sale. What do corporations and unions want in return for their donations to the parties?

      We the people “all have a vote” are for sale. What do “We the people” get in return for our vote? Fifty percent pay no income tax, fifty percent get some sort of largess from the government. (Welfare, food stamps, subsidies housing, farm subsides, and many more.)

      The first amendment gives us the right to voice our opinion but it does not give us the right to demand that the government be our sugar daddy. If we are a compassionate nation, then why do we demand that the government take over the responsibility that should be that of the “We the people”

      Why do we have a constitution? Is it something to hang on the wall like a picture? Or is it a blueprint for neighbors to be neighborly and to keep the government from interfering.

      Our founding fathers established three equal branches of government and that each branch was to ride heard on the other two. Who is going to stop the fiasco that has penetrated the legislation and administration. The only one that can stop this fiasco is the judicial to declare that the phrase "no money (property) shall be taken without just Compensation in the constitution." We can’t depend on “we the people” to do the job at the voting booth.

    30. Mike New York says:

      Only 7% of Obama's administration has any private sector Business experience. Clinton had 36%, Bush circa 54% and Reagan 65%. No wonder our country and its citizens will suffer equally, just like true socialists desire.

    31. Jim Smith New York says:

      By the end of Nobama Nation, everyone in America, who is ethnic will have two U.S GOVERNMENT JOBS, WELL, TWO GOVERNMENT PAYCHECKS, anyway. More bubble-butted mommas, driving GM cars, will double their food stamps, lottery tickets, have third jobs with Acorn an be pickin up two 40 for dat mann. What a country !!

    32. SA says:

      KILL THE TARP PROVISION!!! -please read:

      If the "GOP" is seriously opposed to Cap and Trade, banning the TARP mandate (and preventing any threat of future bank bailouts) would eliminate any motive for the left to impose a Cap and Trade policy on us.

      Goldman Sachs is in the middle of Cap and Trade. Goldman Sachs owns 10% of the CCX (Chicago Climate Exchange). Gensler is the head of the CFTC, he's a former employee of Goldman Sachs. The CFTC is a corrupt agency that's interested in "regulating" the credit market. Since the sketchy subprime dealers never saw their day in court, they're back to their old tricks again of "exposing themselves" or selling naked subprime positions to buyers without the proper disclosure. The CFTC was able to do this on a mass scale which is why the subprime market collapsed so hard to begin with.

      With these freedoms, the traders are free to speculate carbon credits. Under the loopholes that made the CFTC an ineffective, corrupt organization- you could trade subprime debt or other instruments and secure them by using a used Bubba Joe Wrapper as collateral.

      So the result of this is a price spike. Who is this going to hurt? Businesses and companies. The adverse effects of the subprime crisis will be imposed on American businesses and it's consumers in a heavy tax.

      When this carbon credit bubble pops, HR 4213- or this Finance Reform is going to bail out Government Sachs and their ilk. If they didn't have the TARP provision, they would not have the incentive to create highly risky instruments at the expense of our country's businesses and consumers.

      Killing this legislation will hurt Cap and Trade's legislation of passing

      Cap and Trade is not about fixing the environment. TARP isn't going to fix it, 2/3rds of the ISDA Governance Committee consists of derivative dealers and 1/3rd consists of hedge funds. This is the fox guarding the henhouse- the legislation is guarenteed to look like swiss cheese anyways.

      The banks already have a "bailout", it's called their risk management departments.

      So let them fall, don't force the taxpayers to save them again.

    33. George Streib, Washi says:

      The introduction of these bills – Consumer Financial Protection Agency, a permanent TARP, the Agency for Financial Development, a new push for legalizing illegal immigration on top of Obamacare is going to overwhelm any fiable opposition to stop these dastardly deeds. It's like trying to put out a forest fire with a garden hose. The government will have a strangle hold on American citizens before they know what happened! Waiting for the November elections will be to late. Their needs to be a fast way to fire up American citizens to this eleventh hour threat to our country. The country is waiting for a solution. Let's here some solutions now!

    34. Spiritof76, NH says:

      The solution lies in prosecuting those in Congress responsible for the debacle, throw them in jail and abolish their pension and health care benefits.

      Then, slash the fed. govt. budget by 50% and that would match the revenue. Prohibit Congress from borrowing, period. Those that vote against balancing the budget will be removed from office, no questions. Get rid of the EPA, Dept. of Energy, Education. Begin sun-setting the fraudulent Social Security, Medicare and Medicaid. Begin reducing the size of the HHS and Dept. of Defense. Start closing the bases in Europe. Let the Europeans spend their own resources for theit defense.

    35. Joseph Arsenault Dre says:

      It would appear that all is going according to the plans set forth by the pullers of the strings behind the so called leaders of our nation This plan was devised many many years ago. Read the book, "None dare call it Treason" written some 50 years ago and see what was going on during the second world war, and it started long before that.

      Wonder how long it will take to slip the Communist Manifesto into the place of the Constitution. They're hammering hard.

    36. Mike Sheahen, Hickory, North Carolina says:

      With so-called “Progressives” such as the Obama, his accomplices, and those who would “play ball” with them in power, in all parties, not only is their power and money-grabbing for statist government empowering and growing control of the so-called “financial sector” another example of their duplicitous big government statist “let’s grab all the power and money we can, as fast as we can now” and “never let a (real or perceived) crisis go to waste…it is an opportunity to do things you couldn’t do before” (to quote Rahm Emanuel) attitude and efforts, and their skill at blaming anybody and everybody else except themselves for the problems they are only too ready and willing to cause and take advantage of, but so also they show and prove how foolish it is to expect or even call for anything else from such freedom-killing power and money-grabbing statists.

      In other words: “”It is fools who believe pigs are anything other than pigs”, or, as it is written in the bible, “Cast not your pearls before swine, lest they consume them and trample you”.

      The bottom line is: We have no good choice other than to throw every statist, such as Obama and his accomplices in Congress and elsewhere, and those who would “play ball” with them, be they “Democrat”, “Republican”, or “Independent”, out of office and away from power, and replace them with freedom-loving Americans who really want to “Preserve, protect, and defend the Constitution of the United States”. If we don’t throw the statists, and those who would “play ball” with them, out and away from power, then they will have their freedom-killing, disempowering, and resource (including wealth) destroying way, and we will suffer the consequences of more of the same, and so learn too late how so very true it is that “Experience has shown that as government grows, liberty decreases” as Thomas Jefferson said, that “Those who would surrender liberty for a little (imagined) security, deserve neither and will lose both” as Benjamin Franklin said, that “The American Republic will succeed until the politicians realize they can bribe the people with their own money” as Alexis De Toqueville said, that the United States was in fact and indeed “the last, best hope of mankind” as Ronald Reagan said, and that “Too many American’s don’t appreciate the freedoms they have, and evidently won’t appreciate them until they are all gone, and then it will be too late” as many legal immigrants have said, including to me.

    37. John Murphy, Woodbri says:

      What ever happened to Chapter 11 proceedings? If a large company went into bankruptcy, there is a 2/3rds probability that the company would survive. It is stupid to hand a failing company money without changing management or the board of directors.

    38. Marie, Belleair Beac says:

      All of this is part of the big overall plan to take this country into economic depression, socialism and a Communist style take-over where everyone and everything is depend on the GOVERNMENT!. We need to get every one of the politicians in Washington out and start over. Obama is just one of the players. Anyone who surrounds himself with known communists who have never held a job in the "real world", is set on ruining this wonderful country we call America. We, the people, must stop this madness before it is too late. I continue to, and ask that you, call, write, fax, and e-mail your representatives on a daily basis. At least when things start happening, we can say we were headed in the right direction. Get involved in your local 912 project groups or a TeaParty group and make your voices heard now and keep them heard. Get involved to help save this country. Remember the people in Washington work for US.

    39. Pingback: The King of Kong, Health Care, and Liberalism « DouglasernstYLP

    40. virgil jay allen says:

      what is the use to even try and prosper when those of the others always wanting to steal my resourses,, Now I can understand the suicide bombers of muslim and japanese, why live anymore find a faithfull cause in giving my 1 life,, no point, just hope for a better death<<//?? so I say to them not I burn in hell but YOU instead,,

    41. Zack says:

      -Reconcilation used for both bush tax cuts that helped our economy how?

      with a total cost and increase to the defecit at 2.5 Trillion by 2016.

      -total fiscal based defecit increase under gwb and republicans was 6.1 trillion. 5.5 trillion was added by the end of his term. over 1 trillion unaccounted for under private military contracts.

      -i just felt like throwing this in. – less then 10% of the entire housing market share was under cra or any other goverment regulation. 85% of all lenders subject to low or high cost subprime mortages had no corrisponding rise in bank failures- fdic reports. oh and yeah, -its actually true. so 90% of all lenders in free market based economics with absolutley no government regualtions are somehow unaccountable?

      -for all the remarks about november. do you honestly think democrats will lose the house in november or even the senate. why? what have conservatives or republicans offered? seriously what?

      -fox news, townhall.com and this website are feeding this inaccurate misinformed public to no end. sometimes I am truly embarrased to be in the same species.

    42. rodger craft says:

      Simple question about SSI. How many people do you think collect SSI that never paid into or immigrants that never paid into it? If we would not give our money away we would have enough for everything we need. quit giving illegals more rights than the rest of us. I ssay vote all of our government officals out and start over with the kind of people that have OUR best interests in mind.

    43. K.D. Emerson says:

      It seems obvious that the firewall of government agencies responsible for

      protecting and overseeing our economic system totally failed todo their

      duty.

      How many have lost their jobs for their malfeasance? How many

      have escaped criminal charges for their intentional? failures?

      When will the 1977 CRA legislation with its 1995 enhancements be repeales?

      Our liberal Congress is totally to blame for this fiasco!

    44. K.D. Emerson says:

      It seems obvious that the firewall of government agencies responsible for

      protecting and overseeing our economic system totally failed tdo their

      duty or live up to their responsibility.

      How many have lost their jobs for their malfeasance? How many

      have escaped criminal charges for their intentional failures?

      When will the 1977 CRA legislation with its 1995 enhancements be repealed?

      Our liberal Congress is totally to blame for this economic fiasco!

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