By Bill Wilson
Putting Chris Dodd in charge of writing the financial “reform” bill is like calling in Don Corleone to write an anti-crime bill. To expect anything but a whitewash that protects the real criminals is naïve at best.
In brief, Dodd is without a doubt the most corrupt individual to ever sit in the U.S. Senate, and that’s saying something. Not only did he craft a bailout for Countrywide Financial after receiving generous mortgages through a VIP program, he was the top recipient of campaign donations from Fannie Mae and Freddie Mac employees and political action committees while he repeatedly stood in the way of attempts to rein in the failing mortgage giants.
To even let Dodd have the power to put a period in this bill — which purports to solve the financial crisis that he helped to cause — is disgusting.
But in many ways, Dodd’s role in Congress’ latest takeover of the financial system is fitting, since the “reform” bill itself does nothing to hold accountable the actual culprits of the financial crisis, including members of Congress:
1) It does not repeal the failed social policy to put people into homes they could not afford, in particular Clinton era regulations executing the Community Reinvestment Act that strong-armed banks into giving loans to low-income Americans;
2) It fails to rein in the Federal Reserve, whose easy money policies and lower-than-justified interest rates accommodated the housing bubble as it blew up, and then when it popped bailed it out with a $1.25 trillion bailout to investors who bought mortgage-backed securities;
3) It leaves the federal government in complete control of the GSE’s Fannie Mae and Freddie Mac, who through the securitization of $4.7 trillion in mortgages and the mislabeling of Alt-A and subprime mortgages as prime spread the crisis like plague rats throughout the entire world.
In short, the Dodd bill does nothing at all to address the root causes of the crisis, all of which government created, as ALG News has previously reported. What it does instead merely amounts to a distraction from the real crimes that took place at considerable cost to taxpayers.
Although the system has been described as too-big-to-fail, in many ways it was designed to fail. And Chris Dodd now wants to institutionalize that failure — by leaving in place the government institutions, regulations, and policies that caused it.
Commenting on the floor of the U.S. Senate yesterday, Senate Minority Leader Mitch McConnell said, “The way to solve this problem is to let the people who make the mistakes pay for them.” Amen.
That would naturally include eliminating Fannie and Freddie as GSE’s and selling them off piece by piece. It would also mean being honest about the true taxpayer exposure posed by the government’s guarantee of the GSE’s debts. It would mean discontinuing the social policy of pushing home ownership on those without the means to pay for it.
And it would mean putting more restrictions in place on the use of monetary policy to advance such ill-conceived social policies in the first place, and bringing more transparency to the Federal Reserve’s balance sheet.
And finally, to echo Senator McConnell’s call, it would mean bringing an end to “too big to fail.”
Said McConnell, “We won’t solve this problem until the biggest banks are allowed to fail.”
Sounds simple enough for the American people to understand. Those institutions that made bad bets do not deserve one cent of taxpayer money. Unless financial institutions are allowed to fail, the ones that make the worst mistakes will be perpetuated — only to make the same mistakes again.
But this requires an honest playing field in the first place — without government coercion. Unless these designed-to-fail government policies are repealed, the same mistakes will keep on being made by the institutions forced to participate in their folly.
And the real criminals will get away with it.
Bill Wilson is the President of Americans for Limited Government.
