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The Dodd Bill

How on Earth Chris Dodd, who was neck deep in the last financial crisis, became the guru of financial reform is beyond me.  The man has a spectacular record of failure when it comes to regulating businesses.

It’s been tough keeping up with the debate on financial reform as it rolls.  The Democrats can only scream about evil Wall Street bankers while the Republicans are responding with Frank Luntz talking points.  The media is, as usual, worthless.

Fortunately, Bainbridge has been blogging on it. And today, he linked up Heritage’s 14 Fatal Flaws in the Dodd Bill.  A few choice bits:

2.Provides for seizure of private property without meaningful judicial review. The bill, in Section 203(b), authorizes the Secretary of the Treasury to order the seizure of any financial firm that he finds is “in danger of default” and whose failure would have “serious adverse effects on financial stability.” This determination is subject to review in the courts only on a “substantial evidence” standard of review, meaning that the seizure must be upheld if the government produces any evidence in favor of its action. This makes reversal extremely difficult.

I’m sure this will never be abused.

7. Limits financial choices of American consumers. The bill contains a new “Bureau of Consumer Financial Protection” with broad powers to limit what financial products and services can be offered to consumers. The intended purpose is to protect consumers from unfair practices. But the effect would be to reduce available choices, even in cases where a consumer fully understands and accepts the costs and risks. For many consumers, this will make credit more expensive and harder to get.[4]

This is something the Democrats have wanted for a long time.  They think we’re all idiots and will invest all our money in penguin farms if our shoulders aren’t looked over.  It was for this reason, remember, that they opposed Social Security reform.

13. Allows activist groups to use the corporate governance process for issues unrelated to the corporation or its shareholders. Section 972 of the bill authorizes the SEC to require firms to allow shareholders to nominate directors in proxy statement. Such proxy access turns corporate board elections from a process designed to ensure that each board has a good mix of skills and experience into a popularity contest where the long-term interests of the stockholders become secondary to political agendas or corporate raiders. The process can also be used by labor unions, politicians who manage public pension funds, and others to force corporations to respond to pet social or political causes.

The more I look at this bill, the more I see the pattern we have seen in, for example CPSI, which I talked about in a post this weekend.  It’s a pattern of pretending to protect the little guy while really enriching and empowering special interests.  Heritage breaks down specifically how this bill favors the big corporations over little businesses and how it takes a “one size fits all” approach to regulation.

We need to stop judging legislation by its intentions.  We need to not be stampeded toward passage because we’re under the impression that it will finally get Wall Street under control and stick it to those evil bankers.  We need to actually look at what the bill fucking does and act appropriately.

Let’s not do to financial markets what we did to health care and the auto industry.  Let’s not make the same mistake we made with the Sarbanes-Oxley disaster.  Now is not the time to pass anything that comes down to look like we’re getting something done; now is the time to act carefully, for once.  A good bill passed later is better than a bad bill passed now.

Update: More from Cato on special dispensations within the Dodd Bill.  Again, why is this guy the hero of financial reform when his most significant recent achievement was making sure AIG’s bailout protected high-end salaries and bonuses?  When does he become accountable?

Posted by Hal_10000 on 04/27/10 at 03:05 PM in Politics Law, & Economics • Permalink

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