Day: March 18, 2010

Mr. Dodd Has A Plan

With the heated back and forth of the health reform, very little has been reported on the new financial reform bill….Sen. Dodd and some Repub from Tennessee are quietly negotiating for the passage of a financial reform bill….now that it is pretty close Dodd has hit the airways to try and block any  “tea bag”-esque attacks that the health reform bill has received.

I was going to write a piece trying to explain Dodd’s lame attempt to regulate the thieves but the Washington Post beat me to it and theirs is a lot simple and more understandable than mine would have been:

1 A Consumer Financial Protection Bureau, housed inside the Federal Reserve, would write and enforce rules protecting borrowers from abuse by lenders.

WHAT IT MEANS: The location of the agency is a nod to Republicans and conservative Democrats who oppose the creation of a free-standing consumer agency, but everything else about this proposal is designed to please liberals, giving the consumer agency sweeping powers and imposing few checks on that authority.

2 A Financial Stability Oversight Council, chaired by the Treasury secretary, would coordinate federal efforts to identify and manage risks to the financial system and the broader economy.

What it means: Dodd wanted to give the council broad responsibility for policing systemic risks. After massive administration pressure, he agreed instead to give much of that power to the Fed. The oversight council will instead function essentially as the Fed’s board of directors on regulatory issues, signing off on its decisions.

3 A new process would allow for the liquidation of large, failing financial firms.

WHAT IT ME ANS: Companies could be liquidated by joint agreement of the Treasury Department, the Fed and the Federal Deposit Insurance Corp., which already administers bank failures and would play a similar role in the new process. Costs would be paid from a $50 billion pool of money gathered from large financial companies.

4 Credit-rating agencies would be regulated and liable for errors.

WHAT IT MEANS: Breaking with the administration and the House version of financial reform, Dodd’s bill would hold Moody’s, Standard & Poor’s and other rating agencies potentially liable for their judgments about the safety of bonds and other investments. The industry also would be regulated by the Securities and Exchange Commission.

5 Banks would face new limits on trading and investment activities.

WHAT IT MEANS: The bill would restrict banks from running their own investment portfolios or hedge funds, an administration proposal known as the “Volcker Rule” that Dodd initially had rejected. The bill also would regulate the massive trade in derivatives, increasing the proportion of such trades that are publicly reported.

6 Some renovations would be made to the structure of federal banking regulation.

WHAT IT MEANS: Dodd abandoned his earlier proposal to create a single banking regulator after critics argued that the upside was not worth the effort. The bill still would eliminate the Office of Thrift Supervision. The Fed’s authority over smaller banks would be split between the FDIC and the Office of the Comptroller of the Currency.

Is something better than nothing?  I hear a lot of the henceforths and heretowiths …..in other words legal-ese and the “too big to fail” group will still have its relief valve….US, we will still be on the hook whenever they screw up….I guess it is a start….but like health reform…..it is NOT reform….it is a tweak of an already broken system.

A 2011 Prediction

We see daily that the media wants us to believe that the economy is recovering, slow but slowly……but is it really in recovery mode?

A good question that has numerous good answers…..if you were around for Reagan then you should be acquainted with the name Laffer…if not then let me help…Laffer is the father of trickle down economics, where if the wealthy get big tax cuts then the benefits will filter down to all strata of the economy…….bullsh*t!……I am still waiting for it to trickle down to my strata!  Anyway Laffer has some predictions for 2011…..

Arthur Laffer, President Reagan’s favorite economist and creator of the famous Laffer Curve, believes the economy is headed for a “train wreck” in 2011. And he thinks it will be so bad that the current recession look like the good ol’ days by comparison.

Human Events reports the details:

In a wide-ranging discussion about where the economy is headed, and the fiscal, tax and monetary reasons why, Laffer gives a bleak forecast of where President Obama and his administration are taking the country in the next three years — which he predicts will end with Obama’s defeat in 2012.

“Obama is a fine, very impressive person. He really is. Unfortunately, everything that he is doing in economics is exactly wrong. He is a crappy president,” Laffer said.

Personally, I do not put much faith in any of his predictions……but there are days when hell freezes over and today is one of those days…….I will agree with Laffer that it is NOT over…..commercial paper is close to exploding, and the great Satan of the current crisis, derivatives are still being done by the large players in our economy and there seems to be NO taste for financial reform in Washington…all that leads me to think that it can only get worse, but it will give a false sense of confidence first before the sh*t hits the fan….again!