Monday, January 28, 2013

Surely, You Must Be Joking

On our long strange trip from the dismal, dispiriting and depressing second term of Bush 43 into the bizarro world of the current administration, THC has been able to pinpoint the moment when we stopped being a serious nation.

It was when the financial services reform bill of 2010 was bedecked with the official title as the Dodd-Frank Wall Street Reform and Consumer Protection Act and nobody raised an eyebrow nor was there any public or media outrage.

So the major bill enacted by the US Congress to reform our financial system was named after the Senator from Connecticut who not only protected the mortgage companies who exploited gaps in the housing system as it careened toward disaster, but also received favorable treatment on his own mortgages from them, and the Representative from Massachusetts who not only blocked any attempt at reform of Freddie Mac and Fannie Mae in the years proceeding 2008 but actively promoted their expansion while assuring us they posed no undue risk.

Here they are in all their glory:
(Chris Dodd (D) - Countrywide Financial)(Chris Dodd (D) - Irish "Cottage")
(Barney Frank (D) - Fannie Mae)

And what did it accomplish?  Dodd-Frank is a classic in the genre of "it's more important to do something" than to do something that actually makes any sense.  The final bill is a random grab-bag of reforms that had been on the wish list of every self-designated public interest group for the past two decades, most of which had nothing to do with the 2008 crisis.

The two meaningful steps that could have been taken weren't:

1.  Winding down Fannie Mae and Freddie Mac.

2.  Breaking up the largest banks because of the inherent risk they pose to the US economy.

You may have heard that Dodd-Frank ends "too big to fail" (it even states that in the intro to the Act!) but that is simply not true as many commentators have pointed out.  Instead, it actually gave the largest banks a competitive edge against the smaller banks because the market now understands they will never be allowed to fail.

So instead of tackling the two key issues we ended up with a 2,000 page bill, a new unconstitutional bureaucracy (Consumer Financial Protection Bureau) and a deluge of regulations which are already way behind schedule and will undoubtedly contribute to whatever the next financial crisis may be.

In a serious country Dodd and Frank would be publicly shamed.  Instead, Chris Dodd is now the President of the Motion Picture Association of America with a base salary of $1.5 million a year from his new wealthy patrons.  Barney Frank retired from Congress with an inflation-protected pension (unlike private sector retirees) that starts at $130,000 a year.

. . . and stop calling me Shirley!


  1. This is what's been perhaps the most depressing part of all the recent national upheavals for me. It's already cynical to assume that reform won't happen until after a catastrophe. But to see that even after the ultimate catastrophe happens, they don't make the reforms.. all you're left with is utter hopelessness.

  2. Interesting and insightful analysis for sure, but "stop calling me Shirley" trumpts it, LOL! dm