Michael Barone: Run against Wall Street (Rats want Too Big To Fail to continue!)

Senate Banking Committee Chairman Christopher Dodd, after spending some time negotiating with committee Republicans Bob Corker and Richard Shelby, has decided to advance major financial regulation legislation without bipartisan support. Democratic spin doctors will try to portray the fight over this legislation as a battle between Republicans favoring lax regulation of Wall Street and Democrats favoring tough regulation.

But is the Dodd bill really tough legislation, particularly in its treatment of the major financial entities? My American Enterprise Institute colleague Peter Wallison argues that it is not, because it gives Too Big To Fail status to the big entities—Citigroup and JPMorgan Chase, Goldman Sachs and Morgan Stanley. This is done by setting up a resolution process for a failing firm which protects creditors more than ordinary bankruptcy proceedings would. Wallison writes:

“From the perspective of its effect on the economy, it does not matter what happens to the company, or to its shareholders and management. The only thing that matters in a government resolution of a failing company is what happens to the creditors--because it's the creditors that will provide the funds preferentially and at favorable rates to large companies rather than small ones.

"In this respect, the Dodd bill does it again--it signals to creditors that they will get a better deal if they lend to the big regulated firms rather than their smaller competitors, and it does this by making it possible for creditors to be fully paid when a too-big-to-fail financial firm is liquidated, even though this would not happen in bankruptcy. There are a number of ways that this can be done, including through a simple merger with a healthy firm. As a prescription for moral hazard, this can hardly be surpassed. The creditors will line up to provide cheap money to the too-big-to-fail firms the Fed will be regulating.”

Wallison is not alone in taking this view. Clive Crook, writing in National Journal seems to agree:

“You do not deal with ‘too big to fail’ by keeping a list of systemically significant institutions: By itself, that makes things worse. You do not deal with it by promising to let most failing financial firms, including those on your list, go bankrupt: Nobody will believe that promise. You deal with it by combining early FDIC-like resolution for all financial firms, banks and nonbanks alike, with stricter and smarter requirements on their capital, liquidity, and leverage.”

Libertarian economist Arnold Kling suggests an even tougher approach, though he doesn’t say how to put it into effect: break up the big banks.

I think as a matter of both policy and politics, Republicans ought to oppose the Dodd bill’s provisions that effectively grant Too Big To Fail status to a handful of financial institutions (and perhaps to other companies, Wallison has argued). They should oppose giving preferred status to the very largest firms as compared to smaller competitors. They should be prepared to argue that the Democratic bill gives vast advantages to firms whose employees have gotten huge compensation (and who, as it happens, tend to give more money to Democrats than Republicans). The cry should be, no favor to the big Wall Street fat cats. Mainstream media is unlikely to transmit this message but, as we have seen in the health care debate, messages can get through without them.

I couldn't link to the source from the thread about April 15. The window froze when I tried. I had to close it.

Anarchists Plan War On April 15th Tea Parties

Here's the source, the 2nd link. Scroll down fot the text. Poster# 1 there: "I’ll wear my hard hat and carry my “little friend” under a jacket."

Anarchists Plan War On April 15th Tea Parties

Poll: What's Driving the Tea Party Movement?

UK Parliamentary Report busts all climate scientists

Army Report: GIs Outgunned in Afghanistan

Some noteworthy articles about politics, foreign or military affairs, IMHO, FReepmail me if you want on or off my list.

Corrupt Democratic Sen. Dodd the 38th Most Loathsome American of 2009

Dodd still claims there was nothing unusual about the $800,000 in mortgages he got from Countrywide in 2003, but records refute that, too. Documents indicate that Dodd was getting a mortgage of $276,150 on his second home in Connecticut on July 3, 2003. The amount was reduced to $275,042 and the mortgage he was refinancing was paid off. Dodd and his wife also got a home equity loan on their Connecticut property in East Haddam from Countrywide that day.

But the course those loans took was very strange. The standard routine is for the homeowner to sign the loan documents, the borrowed money is sent to the lender being paid off and the new mortgage is recorded on local land records within a few days. Dodd, however, signed some but not all of his loan documents himself.

Agents of Countrywide signed his $275,042 Connecticut mortgage. His previous mortgage with Countrywide was paid off but the new mortgage did not appear on the local land records for an astonishing 16 months.

For nearly a year and a half, Countrywide failed (or declined) to secure its interest in Dodd's home by taking the ordinary and essential step of presenting the documents to the local town clerk and recording them in the land records. This is exceedingly rare in the mortgage business.

MOMENTS TO REMEMBER COURTESY OF DODD

> Dodd's sweet deals from Countrywide Morgtage;

> a castle in Ireland payoff for arranging a presidential pardon;

> Dodd in Iowa to raise million dollar contributions (bribes) from Wall Street suckups;

> lying about his role in the AIG bonuses;

> his parasitic wife making big bucks as board member for Pharma and Health Care Corporations;

> Dodd's (gag) leadership as Chairman of Senate Banking Committee as the economy did a Great Depression melt down.

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Waterbury Republican-American | February 12, 2010 | Editorial / Posted by Graybeard58

We expect senators to be corrupt hypocrites, but when you're taking no-interest loans from banks you're supposed to be regulating, and over a hundred grand in campaign cash from AIG while you just happen to exempt them from your bonus crackdown, it doesn't help to pose as a crusading man of the people, fighting those big mean bankers.

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Reams of legislation Dodd has written or advocated affecting the housing, lending, insurance and securities industries have drained hundreds of billions out of the economy, ballooned the federal debt, cost tens of thousands of people their jobs and driven hundreds of thousands of homeowners into foreclosure, bankruptcy or both.

For his efforts, Sen. Dodd has been rewarded in the 2008 election cycle alone with $7.65 million in campaign contributions (he took in $11.7 million in all) from the securities, insurance, real-estate and commercial-banking industries. With $165,400, Sen. Dodd also tops the list of members of Congress who took campaign cash from Fannie Mae and Freddie Mac since 1989. Sen. Barack Obama, the self-styled agent of change, is a distant second at $126,000....

SEN DODD'S CAMPAIGN CONTRIBUTORS

Citigroup, $310,294;
SAC Capital Partners, $282,000;
United Technologies, $263,400;
AIG, $224,678;
Bear Stearns, $205,600;
St. Paul Travelers, $205,400;
Royal Bank of Scotland, $203,750;
Goldman Sachs, $175,600;
Morgan Stanley, $155,000;
Credit Suisse, $154,550;
Merrill Lynch, $134,950;
The Hartford, $94,350;
Bank of America, $91,300;
JPMorgan Chase, $129,150;
USB, $101,900;
Hartford Finance Services, $101,500
Lehman Brothers, $128,400;
KPMG, $113,100;
General Electric, $108,250;
Deloitte Touche, $108,000

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