In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd’s proposed financial reform legislation wouldn’t have prevented the current crisis … and won’t prevent the next crisis.
Dodd himself has admitted that his bill “will not stop the next crisis from coming”.
As I wrote last month:
Senator Dodd is trying to push through a financial “reform” which bill won’t do anything to break up the too big to fails, or do much of anything at all …
For example, Dodd’s bill:
- Won’t break up or reduce the size of too big to fail banks
- Won’t remove the massive government guarantees to the giant banks
- And won’t even increase liquidity requirements to prevent future meltdowns
As Senator Ted Kaufman points out:
What walls will this bill erect? None.
Just this week, a Moody’s report stated: “…the proposed regulatory framework doesn’t appear to be significantly different from what exists today.”
In sum, little in these reforms is really new and nothing in these reforms will change the size of these mega-banks.
Moreover – as Simon Johnson notes – the bill intentionally doesn’t have much in the way of specifics, but just pushes off on regulators the ability to crack down on Wall Street in the future. As Johnson notes, this is a recipe for continued failure to rein in Wall Street:
If legislation can only empower regulators then, given regulators are only as strong a newly elected president wants them to be, the approach in the Dodd bill simply will not work.
Indeed, Democratic Congressman Brad Sherman – a senior member of the House Financial Services Committee and a certified public accountant – said recently:
The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for. The bill contains permanent, unlimited bailout authority.
And as Arthur Delaney points out, the bill is riddled with carve-outs purchased by lobbyists:
“Obtaining a carve-out isn’t rocket science,” said a Republican financial services lobbyist. “Just give Chairman Dodd [D-Conn.] and Chuck Schumer [D-N.Y.] a shitload of money.”
On MSNBC Tuesday morning, Sen. Bob Corker (R-Tenn.), a Banking Committee member who worked closely with Dodd, said there was “no question” that Dodd’s draft contained loopholes. Corker mentioned a few hits from the carve-out list: “Private equity firms are left out,” he said. “Hedge funds are left out.”
The bill is all holes and no cheese.