As the Senate moves closer to another cloture vote on Senator Dodd’s legislation, we are again reminded of the several flaws found in the Dodd-Frank approach to financial regulatory reform. Beginning with the rescue of investment bank Bear Stearns in the spring of 2008, the Federal government has committed trillions of taxpayer dollars to institutions like Fannie Mae, Freddie Mac, AIG, Citigroup and Bank of America, out of fear that the demise of any of these “too big to fail” institutions would trigger a systemic crisis and collapse of the …
This week, efforts are underway to begin considering a bill sponsored by Senator Chris Dodd (D-CT) which he and the President have claimed would bring real financial reform to Wall Street. As our latest video explains, in its current form, it can better be described as a Wall Street Bailout bill. In his latest paper, Heritage scholar James Gattuso identifies 14 “fatal flaws” and reports that the bill would actually make another financial crisis or bailout more likely to occur. Some of its more worrisome features:
Yesterday, Senator Jim DeMint (R-SC) sat down with us for a quick interview before sitting on a panel with Congressman Tom Price (R-GA) and our own Bill Beach for an event titled, “Is America Sinking into the Dependency Abyss?“. He talked with us about the growth of entitlements and the problems with the Dodd Bailout Bill, saying, “It’s important that we fix the things that caused the financial meltdown in our country. The real frustration with this [bill] is that this is another political package with a label that says …
This past Friday, President Barack Obama again threatened to veto any financial reform bill that fails to tightly regulate financial derivative products which many blame for the 2008 economic crisis. Derivatives work like insurance to protect certain investments, and provide stability to the price of most goods and services. For example, farmers buy derivatives on the price of their crops, so if the price of their crop plummets, the price of the food at the grocery store won’t change that much. Airlines buy derivatives on oil, so if the price …
Treasury Secretary Timothy Geithner stumps for Sen. Chris Dodd’s (D-CT) finance reform bill in today’s Washington Post: As the Senate bill moves to the floor, we must all fight loopholes that would weaken it and push to make sure the government has real authority to help end the problem of “too big to fail.” … Crucially, if a major firm does mismanage itself into failure, the Senate bill gives the government the authority to wind down the firm with no exposure to the taxpayer. No more bailouts. Excuse us if …
Treasury Secretary Timothy Geithner appeared in an interview on The Today Show this morning and decried the “unfairness” of an economy where businesses on Wall Street are recovering, but where Americans still don’t have jobs. Quoth Geithner: “It’s not fair, it’s deeply unfair, and [Americans] should be angry about it.” The concern over “unfairness” is the unsettling ethos underlying President Obama’s economic agenda and, specifically, his proposed tax on America’s banks, intended to recoup dollars shelled out under the bailout program. President Obama aims to tax banks who received bailout …
The Obama Administration promised unprecedented transparency in its financial recovery efforts, including a gee-whiz $18 million web site, Recovery.gov. The problem is that the Administration seems addicted to secret back-channel orders to the private sector to obey, “or else”. Yesterday’s Wall Street Journal reports on a secret “memorandum of understanding” that apparently orders Bank of America to replace a majority of its board of directors (after already replacing former Chairman Ken Lewis). And the Financial Times reports that Citigroup is near a “secret deal” with the FDIC to restructure its …
The Obama Administration appears about to walk away from $7.5 billion in taxpayer money used to prop up Chrysler. This little information nugget was buried in Chrysler’s filing before the bankruptcy judge last week and confirmed by Administration sources. So much for responsible government and transparency! The Bush Administration pumped $4 billion into Chrysler to keep it alive long enough to go into bankruptcy well-prepared. Obama has waived the $4 billion and a $300 million fee. In exchange, taxpayers are receiving an 8 percent stake in a company likely worth …
Commenting on the White House’s Chicago-style negotiations with Chrysler’s creditors, The Atlantic‘s Megan McArdle writes: [W]hen did it become the government’s job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? … these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group. Later live-blogging the Berkshire Hathaway shareholder meeting, McArdle reports: But …
“I want to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector.” – President Barack Obama, April 29, 2009 “After consulting with my auto task force, industry experts, and financial advisors, I decided to give Chrysler and Fiat 30 days to reach an agreement. The standard I set was high: I challenged them to design a plan that would protect American jobs, American taxpayers, and the future of a great American car company.” – President Barack Obama, April 30, 2009 It is quite …
