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Author Topic: "Dodd and Frank: The Dukes of Moral Hazard "  (Read 532 times)
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WhiskeyGirl
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« on: November 10, 2012, 06:03:39 PM »

Scratching head - 

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Thus, despite the claims of the Obama administration and its congressional allies that they were trying to eliminate “too big to fail” institutions, behind the scenes they actually sought to expand the number and reach of such institutions. Writes Wallison:

That’s why the administration and the Democrats in Congress provided authority for the Financial Stability Oversight Council (FSOC) — an über-regulator consisting of all the federal financial supervisors and chaired by the treasury secretary — to designate these clearinghouses as systemically important institutions, allowing them to have access to Federal Reserve funding if they ever got into financial trouble. The FSOC obliged, making the designation in July to little public notice. In other words, eight clearinghouses are now anointed as Financial Market Utilities and made eligible for a bailout from the Fed just like Bear Stearns and AIG.

In addition, notes Morgenson, “the CME Group has argued that it should be exempt from the orderly liquidation authority set up under Dodd-Frank” — the one that “is supposed to end the problem of institutions that are too big to be allowed to fail and also to hold their managers accountable.” The FDIC has not officially confirmed that this is the case, but this view “seems to be gaining traction among other regulators,” she reports. “So these large and systemically important financial utilities that together trade and clear trillions of dollars in transactions appear to have won the daily double — access to federal money, without the accountability.”

'We didn't know this would happen...'

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Moreover, Wallison points out, while the law supposedly prohibits the Fed from bailing out individual financial firms, it “permits the FSOC to designate any financial institution that is engaged in clearing, settlement or payments activities — that is, almost every bank of any size — as eligible for a Federal Reserve bailout if its financial condition might prevent it from performing these functions. So with one hand the act took away bailout authority, but quietly, elsewhere in the act, this authority was fully restored.”

I think the looting is ever increasing...

read more here - http://www.thenewamerican.com/economy/sectors/item/13573-dodd-and-frank-the-dukes-of-moral-hazard
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It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #1 on: November 10, 2012, 06:12:11 PM »

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If you are worried about crony capitalism, this is where it starts. Because of Dodd-Frank, Wall Street and the financial services industry generally will now be firmly in the control of the government. In the future, as long as the act remains in force, we can expect that Wall Street firms will be solid supporters of the administration in power. No CEO will risk the possibility that opposing administration policy will bring an adverse regulatory finding or an enforcement action.

However, that isn’t all. Under Dodd-Frank, if the secretary of the treasury believes that a financial firm in danger of failing could cause instability in the U.S. financial system, he has the power to seize the firm and turn it over to the FDIC for liquidation. If the company objects, the secretary can invoke the power of a court, but the court has only one day to decide whether the secretary’s act was reasonable. If the court does not act in that one day, the firm is turned over to the FDIC “by operation of law.” It does not take much political savvy for financial firms to realize that opposing the secretary of the treasury could be dangerous to their continued existence. All that has to happen is a rumour that the treasury is considering the possibility of a seizure and the firm is toast

Contrast this with Wisconsin's Voter ID law.  Modeled after legislation from other states, it is now in the Wisconsin court system due to challenges.  Likely no honest elections in the future.

How can the courts decide in one day regarding financial liquidations, and take months, if not years for something like Voter ID? 

read more here - http://opinion.financialpost.com/2012/11/09/dodd-franks-crony-capitalism/

Why not end the Fed and open the books?  No more taxpayer funded slush funds?  Crony bankerism?
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #2 on: November 10, 2012, 06:18:22 PM »

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...while pushing more derivatives business into foreign jurisdictions, Dodd-Frank is simultaneously raising taxpayer exposure to this market. In July, the Obama Administration formally inducted eight firms into the too-big-to-fail club, including several clearinghouses that stand behind derivatives trades. Now officially designated as "Financial Market Utilities" that are "systemically important," these organizations will enjoy emergency access to the Federal Reserve's discount window.

Taxpayers will no doubt be thrilled to learn that along with too-big-to-fail banks like Citigroup C -0.19% and Bank of America, BAC +0.43% they are also now standing behind Wall Street trading at companies they've never heard of, like CLS Bank International and the Options Clearing Corporation. And while we're on the subject, can someone explain how the world would come to an end if ICE Clear Credit or even the much larger CME went bankrupt?

Mr. Obama's financial regulation is producing an amazing trifecta: anger among our international trading partners, a less prosperous financial market at home, and a larger taxpayer safety net. We'd call this more evidence of the law of unintended consequences, except this may be exactly what Dodd-Frank's authors intended.

read more here - http://online.wsj.com/article/SB10001424052970204425904578072812116946002.html?mod=googlenews_wsj

Why are taxpayers being burdened with more junk investments? 
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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