5 years later, Dodd-Frank is a failure

I don’t know which is more frustrating, knowing how Dodd-Frank has been a major wet blanket on the economy, knowing how Dodd-Frank has directly had a negative impact on my life, or knowing that a majority of Americans are completely clueless to the detrimental impact Dodd-Frank has had on their lives.

I’m mad.

And I’m mad at everyone.

I’m mad at the Republican leadership.

I’m mad at so called conservatives for giving fuel to the Donald Trump bonfire.

I’m mad at the general ignorance of the American people.

What can I say, we get the government we deserve.

This week Chairman of the House Financial Services  Committee, Rep. Jeb Hensarling, made two attempts to enlighten the American public about the devastating effects of Dodd-Frank. One, by this Wall Street Journal Op-Ed:

Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”

None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.

Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.

Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.

Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.

Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.

Has Dodd-Frank nevertheless made the financial system more secure? Many of the threats to financial stability identified in the latest report of Dodd-Frank’s Financial Stability Oversight Council are primarily the result of the law itself, along with other government policies.

Dodd-Frank’s Volcker rule banning proprietary trading by banks, and other postcrisis regulatory mandates, has drastically reduced liquidity for making markets in fixed-income assets. The corporate bond market is one of the primary channels for capital formation in the economy. Reduced liquidity in this market amplifies volatility. Because of Dodd-Frank, financial markets will have less capacity to deal with shocks and are more likely to seize up in a panic. Many economists believe this could be the source of the next financial crisis.

Dodd-Frank’s scheme for regulating derivatives markets concentrates systemic risks into clearinghouses and then designates the clearinghouses as too big to fail. Dodd-Frank’s “orderly liquidation authority” enshrines taxpayer-funded bailouts into law. Meanwhile, the Fed, by keeping interest rates too low for too long, is introducing dangerous imbalances into financial markets and is likely inflating asset bubbles.

What is most disturbing about Dodd-Frank is the authority it gives bureaucrats to control huge swaths of the economy. The director of the Consumer Financial Protection Bureau, an agency created by Dodd-Frank, can declare any consumer-credit product “unfair” or “abusive” and outlaw it. Oversight? CFPB funding is not subject to congressional appropriations, and Dodd-Frank requires courts to grant the bureau deference regarding its interpretation of federal consumer-financial law.

Dodd-Frank requires that bank holding companies worth $50 billion or more must submit a “living will” to the Federal Deposit Insurance Corp. and the Fed. This “will” is a detailed plan for how the company will cope in case of severe financial problems. If the plan is not to the regulators’ liking, they can require the company to restructure, raise capital, divest or downsize.

The “heightened prudential supervision” Dodd-Frank allows the Fed to exercise over “systemically important” banks essentially places them under government control. Soon the Fed may exercise effective control over the largest insurance companies and asset managers as well. After AIG and GE Capital were designated “systemically important,” Fed officials, according to a Financial Times story last August, became de facto board members of the firms, involving themselves in decisions including whether employees should be fired or disciplined.

Before Dodd-Frank’s passage, former Sen. Chris Dodd said that “no one will know until this is actually in place how it works.” Today we know. The law he co-wrote with former Rep. Barney Frank is gradually turning America’s largest financial institutions into functional utilities and taking the power to allocate capital—the lifeblood of the U.S. economy—away from the free market and delivering it to political actors in Washington.

Five years ago, House Republicans offered the Consumer Protection and Regulatory Enhancement Act as an alternative to Dodd-Frank. It sought to restore market discipline, end taxpayer bailouts and protect consumers with innovative, competitive markets policed for fraud and deception. It’s time to revisit the ideas in that bill, offer new ones and replace Dodd-Frank.

He also released this video:

Those are the facts about Dodd-Frank.

I don’t expect the media to highlight them.

No.

I’m sure they will be celebrating the five year anniversary with their democrat friends .

Just like they do with Obamacare…

Just ignore the damage.

While the peasants rejoice.

What can I say, if I don’t throw in something to laugh at I’m going to go crazy:

 

 

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Wall Street Journal: A Third Term for Obamanomics

Yesterday, Hillary announced her shiny new economics plan minus any real details or new ideas. As the Wall Street Journal points out; “Clinton says the policies are failing but we need more of them.”

Hillary Clinton is running for a third term, and it isn’t her husband’s. The economic agenda that the Democratic anointee laid out on Monday in New York City sounded like a bootleg from President Obama’s stereo—with the volume turned up and stuck on repeat.

Mrs. Clinton’s theme is that “we have to build a growth and fairness economy,” which sounds like a tacit admission that the Obama policies of high taxation, heavy regulation and government income redistribution have produced stagnation and unfairness. She was explicit that real incomes aren’t rising, investment is too slow and opportunities are too few, especially for lower-skilled workers and minorities. The economy “still isn’t delivering for most Americans,” she rightly averred.

Yet Mrs. Clinton never explained why, other than to suggest that Republicans or businesses that want to make too much money are somehow to blame. She slid past the agenda that has dominated economic policy since 2007, and thus she wants to continue delivering the same beatings until morale improves. She hopes voters won’t notice the contradiction.

Paychecks stalled, year after year? Mrs. Clinton has an app for that, although it won’t be Uber. She said “the so-called gig economy” is “raising hard questions about workplace protections and what a good job will look like in the future.” So she’ll use some combination of government spending and coercion of businesses to institute paid family leave, a right to child care, a higher minimum wage, mandated overtime and much else.

Mrs. Clinton calls this “breaking down barriers so more Americans participate more fully in the workforce,” even as she slammed Jeb Bush for suggesting that some Americans aspire to more than a part-time job. Mrs. Clinton’s ambitions include some form of profit-sharing with employees, which seems to be a way of forcing businesses to pay workers what politicians think is fair, not what they can afford to pay based on their success.

Mrs. Clinton also asserted that the decline of unions—merely 11.1% as a share of the workforce—is responsible for income inequality, when workers have fled unions because they have seen them make employers noncompetitive. By driving labor costs still higher in the rest of the economy, Mrs. Clinton would ensure that there are fewer workers to share in less prosperity.

Mrs. Clinton denounced “quarterly capitalism” and said U.S. corporations spend too much on stock buybacks and dividend payouts. “That doesn’t leave a lot left to raise pay or invest in the workers who made those profits possible”—or, she might have mentioned, to pay her handsome speaking fees.

Perhaps to assuage this goose-gander problem, Mrs. Clinton vowed to defend Dodd-Frank and go further with more prosecutions and tougher regulation. Her tax proposal lacked specifics, other than being clear that businesses and the wealthy will pay more. She asserted that the system should be fairer and simpler, but she didn’t say how, and nowhere did she indicate that even Mr. Obama favors somewhat lower corporate tax rates.

Mrs. Clinton evoked a return to the tight labor markets and 1990s boom of the Bill Clinton years. The irony is that the modern Democratic Party has moved far to the left of the President who repealed Glass-Steagall and cut capital gains tax rates, and she is now positioning herself as the tribune of this government-centric liberalism.

It follows, then, that Mrs. Clinton embraced ObamaCare, only more so. She said she’d lower out-of-pocket insurance spending and make prescription drug costs more affordable, presumably through price controls. Mrs. Clinton also said she’d “enhance” Social Security, whatever that means, though it won’t be cheap. She also went beyond Mr. Obama’s universal preschool to call for a new program—also undefined—for “children in that zero to four age group.”

This even-more-liberal-than-Obama pitch raises the question of whether this reflects the real Hillary Clinton. She always was more of a true believer than Bill, but those policy instincts went mute after HillaryCare imploded in 1994. Maybe now in the wake of Mr. Obama’s tenure, and with Bernie Sanders and  Elizabeth Warren prodding her, she feels she can return to her liberal druthers.

Her challenge will be persuading voters that her agenda will somehow work better in the next four years than it has in the last seven. Presidents who elevate fairness over growth usually end up with less of both, and based on Monday’s speech Mrs. Clinton is doubling down.

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In case you believe the Benghazi select committee is pointless, Chuck Todd has a reminder

As usual, before a holiday weekend there is always a vast amount of information dumped on the public. This is when you can find the most honest assessments. From the bad jobs report to Obamacare causing massive rate hikes (a fact the NY time published prominently on their front page…. July 4th) the truth always tends to come out when the media knows few are paying attention. Perhaps this is why Chuck Todd spoke the truth about the Benghazi select committee:

But hey, nothing to see here.

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