• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Morning Bell: The Dodd-Frank Assault on Economic Recovery

    Following the release of the 2,000-page Dodd-Frank financial regulation bill last Friday, fixed-income portfolio manager Christine McConnell told Businessweek: “Clarity is good. [Once financial institutions] understand the rules of the road they’ll be able to accommodate their business models.” There is only one problem: passage of the Dodd-Frank bill doesn’t provide any clarity. In fact, it does the exact opposite. The New York Times explains: “The bill, completed early Friday and expected to come up for a final vote this week, is basically a 2,000-page missive to federal agencies, instructing regulators to address subjects ranging from derivatives trading to document retention. But it is notably short on specifics, giving regulators significant power to determine its impact.”

    In other words, this law is going to be continually rewritten by federal bureaucrats for years to come. And the continued uncertainty it will create is just the beginning of its faults:

    Permanent Bailout Authority: The Dodd-Frank bill creates an “orderly liquidation” process by which regulators are empowered to seize financial institutions that they believe are in danger of failing and liquidate them. While the lack of a broadly accepted process for closing down large financial institutions helped lead to the massive bailouts of 2008 and 2009, this liquidation process is problematic. Federal regulators are granted broad powers to seize private firms they feel are in danger of default, and these powers are subject to insufficient judicial review. Such governmental discretion to seize private property is constitutionally troubling.

    Trusting the Same Regulators that Failed Last Time: The legislation establishes a new 10-member Financial Stability Oversight Council composed of regulators that would be responsible for monitoring and addressing system-wide risks to the financial system. This council would also have nearly unlimited powers to draft financial firms into the regulatory system and even force them to sell off or close pieces of themselves. Unfortunately, it is extremely difficult to detect systemic risk before a crisis has occurred, and the council would serve mainly as a group to blame for failing at an almost impossible task. On the other hand, its huge powers are much more likely to destabilize the financial system by stifling innovative products while failing to detect dangers posed by existing ones.

    Brand New Innovation Killing Regulators: The bill also creates a new Bureau of Consumer Financial Protection with broad powers to regulate the financial products and services that can be offered to consumers. The new agency would nominally be part of the Federal Reserve System, but it would have extraordinary autonomy. This autonomy would impede the efforts of existing regulators to ensure the safety and soundness of financial firms, as rules imposed by the new agency would conflict with that goal. For many consumers, this would make credit more expensive and harder to get.

    Micromanaging the Market: The conference committee also added a form of the “Volcker rule” which would largely prohibit any bank or other institution with FDIC-insured deposits from undertaking proprietary trading or from owning or sponsoring hedge funds or private equity funds. While the legislation does reject the near-total ban on such investments, the difference between legitimate and traditional activities and those the Volcker rule seeks to ban would be difficult, if not impossible, to determine. Attempting to do so would require an intrusive, expensive regulatory compliance system that by its nature would micromanage day-to-day activities.

    Fannie and Freddie Forever: Despite much rhetoric about ending bailouts, the bill does nothing to address Fannie Mae and Freddie Mac, two of the largest recipients of federal bailout money. These two government-sponsored enterprises, now in federal receivership, helped fuel the housing bubble. When it popped, taxpayers found themselves on the hook for some $150 billion in bailout money. The failure to address their future is a serious error and shows just how hollow are claims that this agreement will prevent future crises.

    These are just some of the major flaws in a bill that is just one House and Senate vote away from President Barack Obama’s desk (a fuller list can be found here). But final passage is not as sure today as it looked Friday. The passing of Sen. Robert Byrd (D-WV) leaves the majority one vote short of the 60 needed to move for a final vote. In addition, the insertion of an estimated $20 billion in new taxes has Sen. Scott Brown (R-MA) reconsidering his original vote in favor of the measure. Scott released a statement explaining: “My fear is that these costs would be passed onto consumers in the form of higher bank, ATM and credit card fees and put a strain on lending at the worst possible time for our economy. I’ve said repeatedly that I cannot support any bill that raises taxes.”

    Explaining that the Dodd-Frank bill would force banks to either take on more risk to recoup earnings diminished by reform or behave too conservatively in order to avoid losses, financial analyst Chris Mutascio summarized the ultimate effect of the legislation: “Pick your poison—neither tastes good to us and we believe neither is particularly good for the economy and job growth.”

    Quick Hits:

    • This morning, the Missile Defense Agency and U.S. Army soldiers of the 6th Air Defense Artillery Brigade successfully conducted a successful intercept test for the Terminal High Altitude Area Defense (THAAD) missile defense element of the nation’s Ballistic Missile Defense System.
    • Shallow water drillers tell CNN that President Obama’s deep water oil drilling ban has become a stealth ban on all Gulf drilling forcing hundreds of layoffs with many more on the way.
    • House Majority Whip James Clyburn (D-SC) is trying to insert a provision into the war supplemental funding bill that would compel volunteer firefighters to join unions, threatening the survival of America’s nearly 26,000 volunteer fire departments.
    • The lead attorney in the victorious Chicago Second Amendment case promises: “There will be future cases, I will be bringing cases in the days and weeks to come.”
    • President Obama’s political director Patrick Gaspard failed to disclose that he was slated to receive a nearly $40,000 payout from the Service Employees International Union (SEIU) while he was working in the White House.
    Posted in Ongoing Priorities [slideshow_deploy]

    54 Responses to Morning Bell: The Dodd-Frank Assault on Economic Recovery

    1. Blair, Franconia, NH says:

      Dodd-Frank is a bad idea. It's an assault on our so-called recovery. Why? Because it

      would make banking untenable. We don't need it. Obama may cry like a baby but it's

      the truth.

    2. Mary, WI says:

      I admit I don't understand all that is in this financial refirm bill. I do know that if the house passed it it must be BAD NEWS! I hope the senate does not pass it although I'm sure BO will press the issue until he gets what he wants just like a squeeky wheel.

    3. MJF, CT says:

      How in the hell are these two guys allowed to keep doing this to us? When is someone going to put a stop to them?

    4. Winghunter says:

      Both Dodd and Frank are two of the leading culprits in bringing about the destruction of our economy through extorting lenders to make bad loans.

      Is it any wonder then, that they're setting up a way to continue stealing by taking complete control without declaring exactly what they're doing(?)…AND why aren't these clowns in prison!

    5. Ken Kensington-- Wil says:

      Did we expect anything different from Dobb-Frank ? Hopefully we can counter this " thing " after the up and coming November elections, wish Barney was going with Dobb into retirement, they just don't get it and never will until we get real fiscal responsible elected representatives.

    6. Richard Cancemi, Arl says:

      Dodd and Frank, involved in anything financial? What a joke! They are two of the generals in the Progressive army which has been marching on the citadels of the Constitution and the Bill of Rights for years! Look at the mess they have already created with their 'oversight' of the 'Freddies'.

      Obama is the Chief of Staff, but from whence does he receive his orders? Who is/are the Commanders-in-Chief of this Progressive army?

      Progressives are relentless in their contempt for all that has made America great! Their goal is: "change/destruction"

      Our defence has been feeble over the years. If the Conservatives do not have a successful November 'Surge' in our elections, we will surely be overrun by these 'barbarians' and the American Way will be further devastated!

      Reconstruction will take decades!

    7. azwayne says:

      A true reform would include fannie and freddie true cause of failure. Hold legislators involved responsible. Congress ethics committe should be so busy they can't look at anything else. Taxes get paid by people not corporations. Teach government no more money stop spending what we don't have

    8. Barbara Walsh Hollan says:

      It is interesting how the two congressmen who gave us the Fannie and Freddie debacle are now going to fix the banks. Can't wait for Dodd to retire and with any luck Barney will lose in November. In the meantime God save our country.

    9. Mike, NPR FL says:

      It seems to me this administration is doing more to "break the backbone" on this country and it's freedoms than anything else. Which leaves this question; Why are they doing this ? Do they want our nation to fail ? It sure seems that way from down here at this vantage point.

    10. Joseph Gerant, Boyne says:

      Enough with regulation, especially with two of the most corrupt in Washington. Those two have dug in well for way to long, covering their tracks with lots of help. "One hand washes the other" is appropiate. Citizen contempt of government is the result. Our Founders hoped the best would get elected, and some wanted yearly elections, just in case. Democrarcy is messy be still the best system. Repairs are on the horizon.

    11. Don Harper, Lubbock, says:

      Whether it is finacial reform, healthcare reform, cap and trade, comprehensive immigration reform, education reform (race to the top), or Obama's attempts to undercut our Constitution through his lame Supreme Court nominations, none of it addresses solutions to the underlying problems. All of it reduces our freedoms while expanding the powers of the federal govenment and cementing the Democrat Party in permanent control. We now have rulers, not leaders.

    12. rosemarie douglass says:

      those 2 have to goo, wy are the repuplicans so dense

      get a bck bone

    13. rosemarie douglass says:

      my english needs to get better , i`m trying

      Dodd and Frank need to goo, the are the ones that ruinedthe housing buisness,

      the repuplikons need to speak up moore and macke some noise , the dont have a back bone , so sad

    14. AndyB says:

      Subtle and insidious takeover of the entire economy; but starting to become very transparent. The Progressives don't need the sector specific expropriation practiced by Chavez; they already have the greatest weapon; the world's largest printing press.

    15. Richard Coddington, says:

      In the Health Care Bill, you have lots of clarity, and a 3,000 page bill. In this one, the complaint is not enough detail. lt's been my observations over the years that legislation that outlines what is to be done and allowing the implementing regulations to determine the detail, works best. Having congress do the detail is not successful. We can't have it both ways, guys!


    16. Harry Mavrogeroge says:

      Man, I just hope the people of Frank's and Dodd's districts will finally get it and vote these bozos out. I would, only I don't live in either district. I'm in Bill Delahunt's district, and thankfully he's not running again. We have our sights set on Joe Malone-R.

    17. cynthia overland san says:

      Two words–Dodd/Frank–Probably two of the TOP Ten who were responsible for bringing about this "recession". Why aren't criminal proceedings being sought on these two as well as their cronies? AND Freddie and Fannie are unscathed. My only prayer is that we are still intact as a nation for the November elections.

    18. Steve Jones, St Pete says:

      These clowns along with a long list of others should be doing time, not designing new ways to strip us of every nickel we earn. What does it take to get them stopped. Between now and January, when replacements will take office, these two and their corrupt brethren can and will do untold damage to what's left of the Land of the Free!

    19. Lil, San Diego says:

      How can anyone trust anything Dodd and Frank create? I remember when they BOTH spouted that Fannie & Freddie were just a-okay! How many times do we have to witness the abject failure of these two clowns? How many times have we seen these regulators fail? Can we say Gulf oil spill!!!! How many times must it be proven that "big govt." cannot succeed and is a failure! This latest assault on the American public is just another example of the failure of the progressives to grasp simple facts: their policies are wrong and always fail, the American public does NOT want big govt., the American public wants LESS govt., and, most assuredly, we do NOT want progressive policies!

    20. TeaParty says:

      Frank and Dodd are the very culprits who covered for the problems with Fannie Mae and Freddie Mac. I have been in banking for forty-six years and know how Bush warned Frank and Dodd that FM and FM needed to be closely looked at. Frank sat before the camera and said FM and FM was in good condition. I made loans and I can say first handed that the banks were pressured to make loans dictated by Frank and Dodd. When I say pressured I mean pressured. I even heard (my bank was never involved) Acorn policed some of the banks by accompanying some customers to the banks to

      make loans. They both need to be hung out to dry!!!

    21. Jeanne Stotler, wood says:

      buyer's beware! There is no reason for any legislation to be 2000 or more pages unless it's loaded with pork or houses many hidden adgendas. Any bill before congress should be written so that the average citizen can comprehend it, and as I've said before it should be mandatory that it be read by each member of the congress before voting (and a sworn statement signed to the fact). Nov/ 2nd can't come too soon.

    22. Mike, North Carolina says:

      The Dodd-Frank assault, and any, of any political party, who vote for it, is simply yet another example of the Statist's determination to grab as much power and money as possible, as fast as possible, both before and regardless of any elections yet to occur, while they can, knowing we, the people, cannot immediately stop them and that it will be extremely improbable if not impossible for us to undo at least most of their Statist freedom, resource, and security-destroying power and money-grabs, same as the Statist fraud they've made of Social(ist) Security and so many others of their Statist schemes.

    23. GEORGIA Dreyer says:

      If I did what these two have sone I would be in jail. I can't understand how this is going on and on. Isn't there anybody up there to put a stop to this BILL. Where are the people that should be watching out for the American People. They all must be crooks or else they would open their mouths. We need an investigation that goes somewhere other than, oh well if I tell, he'll tell on me. Get rid of all these crooked theives and send them to jail forever. God Bless America

    24. EON, Stillwater says:

      This bill is another nail in the coffin to the economy. Sen. Brown is worried that this will hurt lending. Let me inform you Mr. Brown, there is no lending. The construction industry was about 30 percent of economy, and it has shrunk to a 1/4 of where i was part due to over building, but mostly to government intervention. It is now so hard to get a home loan that some builders can't even get an appraisal high enough to cover the basic materials and labor needed to build it. New appraisal rules instituted in May have destroyed the market. Many lenders are requiring credit scores of 740 or higher to even do a refinance. There is no recovery, and until the government steps back, shuts up and quits spending this will go on for a decade and unemployment will hit over 20 percent.

    25. Timpclimber Provo, UT says:

      Dodd & Frank are Big Time government thugs, If they have their way the financial industry will be become a punch and judy puppet show scripted by the feds who have done such a wonderful job with freddie mac and fanny may. Anyone noticed the housing slump now that the incentive is gone or all the new jobs created by the stimulus bill? Remember all of this in November!

    26. toledofan says:

      The usual suspects are again trying to right the ship that they caused to sink. These guys have no business in the banking business and both should be cell mates of Bernie Maddof. What is really sad is that Fannie and Freddie have been exempted from the regulations. Somebodies making some serious cash on this and I think Dodd may be just padding his nest when he retires. By the way, what makes these guys experts anyway?

    27. LeeMcD, Mountain View says:

      Some of this financial crisis comedy puts all this in prespective…

      The Proud, The Rich, The Reserves (Federal Reserve Banks)

      Banking On It – A Financial Crisis Sitcom

      A Federal Reserve Crap$hoot – Online Stress Relief Game

    28. Zack says:

      What I can't understand is how 28 people so far on this blog can possibly be that ignorant! Wow, you guys are really laying it on thick. Its like the same blame Dodd and Frank story over and over and over because…….you heard it here at Heritage or Fox News.

      I love Mr. Carroll's talking points too! So boring but refreshing. Would all 28….ahem 29 of you like total market share bottom line losses in 2008/2009 for Fannie, Freddie(G.S.E.'s) or all other Lenders subject to C.R.A. against the Private company Lending? lets see…..about 350 billion to 1.6 trillion. Lets talk about how great this "free market" idea for lending has worked out. Lets talk about the 12 years of conservative unlimited congressional control to place any measures against this disaster before it happened. But of course, Blame one Banking and one Finance comittee chair against the Congress Majority, because that makes perfect since! Have any of you read through THe C.R.A. act of 1977 or researched and studied the actual effects of those and G.S.E.'s on market share loss?

      Blame Dodd and Frank as much as your hearts desire but Legislative history and actual numbers provide just a little more credibility then talking points. You guys are pathetic.

    29. Drew Page, IL says:

      Another 2,000 page bill that Obama will sign that he, and most in Congress wo0n’t read, that will have to be passed before anyone knows what’s in it? Put together by Chris (I thought the free loan was a perk of the job) Dodd and Barney (give us more authority and power) Frank. Fannie and Freddie to be left unregulated. The government given the power to liquidate any business they feel is failing. And you wonder why the country is going to hell?

    30. ComradeChaos, NoVa, says:

      The article states, "the bill does nothing to address Fannie Mae and Freddie Mac, two of the largest recipients of federal bailout money."

      Then the bill is worthless, billions of dollars in taxpayer money, with fannie & freddie execs getting millions in bonuses, yet the dems do nothing about it.

      Dodd & Frank – the two biggest punchline in D.C.

    31. Ron Derry NH says:

      This is socialism's finest hour as they wrap America up in bureaucratic subterfuge and 2,000 page legal meanderings to bamboozle americans into slave hood to political corruption and coercion through regulatory BULL.

      We are being dissolved into a mind blowing charade of "reform" that is nothing more than the foundations of complete corrupting of sense and responsibility while adding more layers of deceit.

      Thugocrats destroying our once great Country with the same lies and theft that got us here in the first place.

    32. Robin, Cornelius, NC says:

      Oh yes, let's allow the fox to watch over the hen house!

    33. Len, Alexandria,KY says:

      How can it be that the TWO most Corrupt individuals regarding Freddie and Fannie were put in charge of Fixing anything that has to do with FINANCE REFORM without including Freddie and Fannie???
      More Machnations directed by the Supreme Inept in order to once more rush something as disastreous as the famous Stymulus… HC…. and just having a sense to rush things while Screwing up the Gulf Issue as well as the Border Issues.. where is teh sense of urgency to FIX that which can be fixed in realive shoert time while Rushing more Disasters to Tax Payers????

    34. Norm Klevens says:

      Permanent Bailout Authority: there is no due process in this part of the bill so the treasury, executive branch or congress can close a business down at will without redress.[ I think AIG should be shut down today. While others paid back funds, they have paid back a big zero.] Without the ability to seek court relief, this must be unconstitutional. If this doesn't show the so called Independent voter who these people are, what will ? Then the Disclose Act seeks to shut corporations up, while allowing more rights to unions. And now the so called benefits of Obamacare, regarding pre-existing go into effect now. The people of this country need to wake up now as we are being locked out and pandered to, while being called Brown Shirts and certainly wake up by November. And where is the RNC ?

    35. Don't tread on says:

      How did "we" allow these cretins such power? The power to destroy our Constitutional Republic,

      so weaken our economy, intentionally cause a massive world depression. Americans are preparing for something, bying emergency food supplies and other survival gear. Hold on to your hats folks, we are in for a bumpy ride.

    36. lau says:

      The foxes are permitted to write new rules for the hen house?

    37. Eugene Kupstas, Kins says:

      Dodd-Frank is just another example of the "bad bill of the week club" way of thinking. Every issue is too urgent to allow serious study or deliberation, and every situation is so dire that the Constitution must be trampled and common sense must be suspended. These last couple of years will go down in history as a time when every issue on the progressive agenda was dealt with in a panicky way that left future generations all the worse.

    38. jose m. arteaga says:

      it is the sme old thing on the liberals on continuing the destruction of our great country. all they have in their agenda is anti-americanism, trying to implement socialism and right afterward communism to HAVE control over the people so that they can be in charge of everyone's lives and have POWER. i do believe that these people want that so bad, that they will do and say anything to make the people believe that they; the liberals of these united states of america have the best interest at heart for us. and alot of people do not pay attention on the politics of today and many americans just go out and vote on whom ever not knowing what may come at the end. conservative america HAS to rise from the ashes just like the " phoenix" had… can anyone answer this, how come the U.S. allowes other people that come here from ther countries of the world and become citizens or yet duo citizens to run for public office and i know of no other place that has this in there books. this country is usualy right on top of things when disaster strikes in some place of the world, with humanitarian help and most of the world does have HATERED towards the united states of america. how come this IS? anyways i love tis great country of ours and the sad thing about it is that all can do is probly just cast my legal VOTE. i guess that if alot of americans could see through these democrat liberals like many of us do, we would have conserative republicans in the majority in the senate and congress and but of course the white house. god help us in november 2012 and god is good. i think we will take back the federal government soon and though things are real tough right now for many many people here, that this saying from my great grandmother, antonia, from DEL RIO TEXAS,would say "the misseries of hell do not last a life time, sooner or later GOD gives us our compensation". and with this my friends i bid everyone a good night. jose from las vegas, nv.

    39. bill alford bellevie says:

      I am convinced that Washington DC is being run by the Mafia. The masses of the people need a strong , honest upright leader to thwart these crooks.

      Someone tell me how we are to find this person or persons. All I'm seeing are these groups using the existing actions and circumstances to ASK FOR MORE DONATIONS. I wouldn't know who to give my hard earned money to.

      Give me an honest statesman and I will follow until Hell freezes over.


    40. Zack says:

      So basically from 1999-2009, bad loans that originated in the private sectors, outside of Fannie and Freddie, taken in by Fannie and Freddie makes it the Governments fault that the bad loans originated completely outside of Fannie and Freddie in the first place? so much spin it makes you dizzy! You guys are too much!

    41. Rob McLemore OKC, OK says:

      I need to read the bill, but it is absolutely critical that a balanced financial reform bill is passed. IS this the one? I don't know yet. Lack of regulation of banking/investment institutions along with regulations encouraging lending to people that could not afford the mortgages they received created a huge problem that will be repeated if proper regulation is not enacted. Read "13 Bankers."

      Deregulation or lack of regulation is not always a good thing.

    42. Pingback: Today in Washington - June 30, 2010 | RedState

    43. Tom K says:

      They are just doing what they are told, you know they aren't smart enough to think of this crap themselves, It's the same people that has their hands on obama's strings.The same A-HOLES that want to control you and the rest of the world. TIME TO WAKE UP FOLKS!!!!!!!

    44. Pingback: Disequilibria: A Constant State Of Instability » Disinformation and Financial Reform

    45. John Schroy, Naples, says:

      Dodd-Frank is much more than a financial reform bill. In Title XII there are provisions that provide for grants to ACORN-like organizations to authorize funds for 'education' and for small loans to low income people, and that also authorizes grants to cover these 'loans' when not paid.

      When one considers that sub-prime lending was a major cause of the current crisis, it seems extraordinary that this so-called 'reform' bill would specifically provide for more sub-prime lending.

      It doesn't take much imagination to perceive that the purpose of Title XII would seem to be that of providing money for political operatives to buy votes.

      For details, See: http://www.capital-flow-watch.net/eespk

    46. Pingback: Michelle Malkin » The Dodd-Frank monstrosity

    47. Pingback: The Dodd-Frank monstrosity; Update: Cloture invoked, final vote this afternoon | The Daily Conservative

    48. Lisa G in NZ says:

      This just passed with a cloture vote. See:

    49. Pingback: ‘The Big Grab’ … passed Senate 60-39, thanks to GOP help - Dateline Zero

    50. Pingback: RagingElephants.org » Morning Bell: The Dodd-Frank Assault on Economic Recovery

    51. Pingback: The Patriot's Flag » Hedge Funds, Meltdowns and Fraud

    52. Pingback: Financial Reform | They Win, You Lose

    53. Can be blogengine greater than live journal in a roundabout way? Must be because it's more and more popluar recently.

    54. Pingback: Dodd-Frank Debacle | Designs on the Truth

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.