Saturday, July 10, 2010

Analysis of Dodd-Frank Financial Overhaul Bill

This is a repost of an excellent analysis of Dodd-Frank from Liberty Central.  There was a sheepish admission that did not instill much confidence in me or anybody else, coming as it did from one of the principal architects at 5:00 a.m. after an all-night session to hammer out final details. "It's a great moment. I'm proud to have been here," said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. "No one will know until this is actually in place how it works."

I was stunned when I read those words.  No, I was shocked that this kind of stuff could actually be happening right under our noses.

This is an all-too-familiar pattern that has been repeated again and again over the course of the last year and a half.  There is only one way to characterize the work product of this Congress:  Middle-of-the-night-behind-closed-doors legislation passed by the Democrat majority with little or no collaboration solicited nor support garnered from any opposing voices while America sleeps. 

The question is often asked these days why the Constitution -- that dusty old piece of parchment -- should still be relevant in today's modern world.  Like Obamacare, this monstrosity of repressive tyrannical oversight (I do not overstate it) does nothing but put unrestrained powers into the hands of unelected bureaucrats through the creation of yet another federal agency governed by presidential appointees.  It's even hard to remember the criticisms of "King George" W. Bush for what were seen as outrageous presidential grabs for power.  There are few or none who seemed alarmed at what is going on in this administration, especially from the MSM.  Rarely do we hear a peep from them anymore.  We must increasingly turn to other sources for insight. 

I'm not certain anybody really cares about this over-reaching bank regulation, but I have to admit I am amazed at what I see happening in the sudden and swift erosion of our liberties and freedoms.  And the reaction of the bank lobbyists and investors when they saw this bill is that they were "relieved?"  I find no relief at all in what follows. 

I can't help wondering what Thomas Jefferson would say today, when this is what he said in 1791:  "I would rather be exposed to the inconveniences attending too much liberty, than those attending too small a degree of it."  (Letter to Archibald Stuart, Philadelphia, 23 December 1791).


ASK QUESTIONS: Dodd-Frank Financial Overhaul Bill

By: Sarah Field, 1 Jul 2010

Yesterday, the House passed the 2315-page Dodd-Frank Financial Reform overhaul 237-192 with three Republicans voting for it: Cao (LA), Castle (DE) and Jones (N.C.). Fourteen Democrats voted against it: Boren (OK), Chandler (KY), Childers (MS), Critz (PA), Giffords (AZ), Hill (IN), Kaptur (OH), Kirkpatrick (AZ), Kratovil (MD), Minnick (ID), Mitchell (AZ), Nye (VA), Ross (AR), and Shuler (N.C.).

[Utahns in the 2nd Congressional District, please note that Jim Matheson voted FOR this bill, reason enough for you to reconsider your vote in November -- I support Morgan Philpot in this race, and encourage others to join me].

It will head to the Senate after the 4th of July recess and, even though Senators like Collins (ME), Snowe (ME), Nelson (NE), and Brown (MA) were worried about the $19B “bank tax,” there are many more, even costlier parts of this bill. In fact, on page 357 of the bill, there is an unlimited bank tax. This guide will give you the tools you need to call your Members of Congress or ask them tough questions during town hall meetings when they are home on July 4th recess.

The three most important things to know about this bill is that it (1) Creates a permanent bailout authority, ending TARP, but instead of using that savings for debt reduction as the law required, forces taxpayers to bear the costs of the new legislation, (2) Sets up the federal government to micromanage the markets and overload them with regulations, and (3) Continues to protect Fannie Mae and Freddie Mac. This bill vests more power in administrative agencies and will raise the costs of living for every American with higher fees on our markets.

Liberty Central read the entire Dodd-Frank Overhaul bill and picked out key questions that delve into other major problems with the bill:


Did you know…?

…that the bill sets up the Financial Services Oversight Council, appointed by the President, to identify risks to financial stability and can vote on which companies fall under its jurisdiction? (TITLE I)

… that there is an elastic clause where the Council, Board of Governors, and Supervising Agencies can make whatever rules or issue whatever orders are necessary to carry out their duties? (Title VIII) That’s unelected bureaucrats interpreting the law how they see fit.

…that while taxpayer funds can be used to liquidate a company, no taxpayer funds can be used to stop liquidation of a company? (Title II, P. 380.)

…that the FDIC has permission to decide which creditors receive more money than their similarly situated creditors? (Title II)

…that, during the liquidation process, the FDIC can make additional payments to the individuals it chooses to minimize losses to the “orderly liquidation.” This also gives power to the FDIC to pay some creditors more than they deserve.

…that the Federal Reserve can still make emergency loans if they decide it is necessary for the stability of the economy? (TITLE XI)

…that Title III ‘plays mix and match with the letters of alphabet soup agencies’ by replacing one former bureaucratic regulatory agency (the Office of Thrift Supervision) with another, more powerful bureaucratic regulatory agency (the Office of the Comptroller of the Currency) that is not even accountable to the Secretary of the Treasury?

… that the Office of the Comptroller of the Currency is not given a budget, but instead the bill gives the office the authority to raise its own funding from assessments, fees, and charges from any entity described in section 3(q)(1) of the Federal Deposit Insurance Act, Title III, Sub. A?

…that this bill contains a power-grabbing new Office for Federal Insurance at Treasury, regulating an area traditionally left to the States? (Title V)

… that the bill prohibits states from collecting a licensing fee (for surplus lines broker) unless the state is participating in a national database? (Title V)

… that this bill establishes what is, in effect, an Investor Czar by creating the office of the Investor Advocate? (Title IX)

…that there will be a government database kept of all persons with custody or use of securities or money? (Title IX, Sec. 1333)

…that the bill establishes another government bureaucracy in the Office of Municipal Securities? (Title XI)

…that the bill sets up a new bureaucracy in the Bureau of Consumer Financial Protection, which regulates the offering of consumer financial products as an executive agency, with its director appointed by the President? It does not have a specified size, but lists the need for branches in D.C. and elsewhere. (Title X, Sub. A)

…that the federal government now requires mortgage loan originators to register with the government, and grants regulatory authority to a bureaucracy? (TITLE XIV-Sub A.)

…that the Financial Services Oversight Council determines the definition of “financial activities”, is to establish “prudent standards” for banks and has taxing power and can limit the size of financial institutions? (TITLE I)

…that a government bureaucrat can exempt companies from regulations if they decide it’s in the “public interest”? (Title VI)

… that the government will now dictate the terms of credit ratings, and sets up a federal Office of Credit Ratings? (TITLE IX)

…that the Office of the Comptroller of the Currency is given sweeping regulatory powers and little accountability; the Secretary of the Treasury is barred from intervening in any matter before the Comptroller unless provided for specifically by law. (Title III Sub A Sec. 324 (b) (1))

…that funding for the Board of Governors of the Federal Reserve System is done by the Board, who is free to collect as much as it wants from any bank or non-bank financial institution with holdings over $50 billion? (Title III Sub A)

…that the Bureau of Consumer Financial Protection has the authority to declare an act unfair, may collect information about business conduct and activities of covered persons and service providers, has investigators with subpoena power and make rules on abusive practices? (Title X, Sub. B, Sub. E)

… that the Secretary of Treasury or the Board of Governors can decide if a company needs to be liquidated or liquidate assets? (Title II, Title XI)

…that the bill has emergency authority to liquidate positions in security, and the decision to do so is arbitrary with little room for review? (TITLE VII)

… that the Board requires annual stress tests to determine if a company has adequate capital and can require reports on the financial condition of nonbank financial companies, and to give up any information requested “promptly”? (TITLE I, Sec. C)

…that a company with $50 billion in holdings cannot purchase shares of certain other companies without permission of the government? (TITLE I, Sec. C)

…that the bill allows the government to liquidate companies deemed “failing,” with creditors and shareholders taking the loss, including foreign banks? (Title II)

… that the government can discharge any contract that the company entered into if it considers it to be “burdensome?” (Title II, pg. 266)

…that the bill allows the Board of Governors to regulate what it decides are risky transactions, and who will supervise? (Title VII)

… that it is left up to the Commodity Futures Trading Commission to define “commercial risk” and that the commission shall review every swap? (TITLE VII)

… that that FDIC would be able to reorganize any liquidated company as a “bridge financial institution” with a board of directors that is appointed by the FDIC? (Title II, p. 320 – 358)

… that this legislation would newly micromanage private fund advisors who are responsible for a relatively small amount of money? (Title IV)

…that every registered agent in swap markets is required to have a designated compliance officer, who is required to file an annual report with the government? Did you also know that the government now requires information about security based swaps be made available to the public, and that there is to be a depository of swap information, and that depository may share information with other Federal agencies and some foreign entities? (Title VII)

…that there is now a requirement that shareholder votes be held on executive compensation every 6 years, and that the government controls the makeup of the Board of Director Compensation Committees? (Title IX)

…that the federal government now requires written appraisals of all property, and requires that appraisers be registered and conform to regulations? (TITLE XIV, Sub. F)

…“Swap data repositories” are like stock exchanges for certain financial transactions that are not offered to the public for investment.

… that swap data repositories may be required to provide information — including transaction data identifying individual investors — to US regulators, the DOJ, and foreign financial supervisors, central banks, or ministries? (Title VII, p. 876)

…the Commodity Futures Trading Commission is authorized to develop new duties for swap data repositories based on “any evolving standard of the United States or the international community”? (Title VII, p. 881)

… that the Commodity Futures Trading Commission can set limits on how much any one person or group of related persons can invest in swaps or options? (Title VII, pp. 941-948)

… that publicly traded Boards of Trade will be required to have their board of directors and the other decision-making bodies reflect “a broad and culturally diverse pool of qualified candidates”? (Title VII, p. 940)

… that the Commodity Futures Trading Commission may forbid foreign boards of trade from taking orders from US persons unless they are registered with the Commission and comply with similar regulations as US boards of trade? (Title VII, pp. 951-957)

… that the financial reform bill tries to, in essence, rewrite certain provisions in private contracts? (Title VII, p. 960)

… that the Commodity Futures Trading Commission previously could not make its interpretations the exclusive way to comply with regulations, but now it can make these interpretations mandatory? (Title VII, p. 977)

… that the financial reform bill creates an interagency working group to study the oversight of carbon markets, including carbon spot markets and derivative markets? (Title VII, pp. 1012-1014)

… that the Commodity Futures Trading Commission and Securities Exchange Commission are required to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards regulating swaps, futures, and options? (Title VII, pp. 1016-1017)

… that, if the Commodity Futures Trading Commission accuses a person of providing false information or manipulating the price of any swap or commodity, the hearing to determine penalties take place in three days or less, and any penalized person has only 15 days to file an appeal? (Title VII, pp. 1019-1026)


Did you know…?

…that this bill is full of over 16 studies, including whether to end the Conservatorship of Fannie Mae and Freddie Mac, reverse mortgages, insurance premiums of banks, private education loans and credit scores?

…that the bureau of Consumer Financial Protection will also collect data about small business loans, including whether the loan is to a minority or woman owned business, and maintain a database which includes the revenue and racial, ethnic and gender characteristics of the business? (Title X, Sub. G)

…that the bill is full of measures that continue to divide Americans by race by creating specific programs for racial minorities and women, including an Office of Fair Lending and Equal Opportunity (Title X, Sub. A), Office of Housing Counseling (TITLE XIV, Sub. D), the Office of Minority and Women Inclusion (Title III, Sub. D), and requires recruitment at historically black colleges and other minority serving institutions (TITLE III, Sub. D)?

… that this national insurance office’s charge will be to help ensure that the under-served community, consumers and minorities have access to insurance and that this sounds much like the policies that set up the subprime loan distortions in the mortgage business under CRA? (Title V)

… that this bill imposes a debt limit on nonbank financial institutions, but excludes Fannie Mae and Freddie Mac and exempts Fannie and Freddie from securities laws, while proscribing new standards for loans (Title IX, TITLE I, Sec. C)

…that all of the government employees from the abolished Office of Thrift Supervision will simply be transferred to other departments? (Title III, Sub. B)

…that the TARP Program is still in place, and allowed to purchase troubled assets if there is deemed a threat to financial stability? (TITLE XIII)

…that the bill contains a pet project that seeks to make sure that materials coming from the Congo and other “conflict” areas are not being used? (TITLE XV)

…that the bill has greater regulation on extraction of oil, natural gas and minerals, and regulates the foreign trade of those materials? (TITLE XV)

…the Bill sets up a Financial Crisis Assessment and Fund, which applies to any company engaged in activities that are financial, or incidental to the financial sector. This fund will be paid for by companies, and will determine the impact on low income and minority communities if the company fails? (TITLE XVI)


This bill is incompatible with the Founding Fathers’ vision of limited government, because it promotes the growth of government, expands the powers of the administrative bureaucracy, limits economic freedom, and promotes personal interests. Limited Government requires that the powers be shared among three, co-equal branches: the Executive, Legislative and Judicial. With the system of “checks and balances” combined with the vote of the people, there exists a system of oversight over the actions of the federal government. However, today’s federal government also involves administrative agencies, the so-called “fourth branch.” These parts of government are unelected and usually filled with career employees at all but the highest level, yet they have both lawmaking and enforcement powers. Unfortunately, this bill vests even more power in administrative agencies and will raise the costs of living for every American with higher fees on our markets.

1 comment:

  1. I’d love to combine credit card, debit card, savings account and checking account. When your have a credit balance, they pay you interest. Credit cards used to have checking account but banks are fickle with fleeting products. As soon as you get used to it, they discontinue it. I’d love to have all my accounts tied together, but banks are so superficial.

    The problem with GLB 99 was it was inconsistent. We need a simple regulatory scheme that applies equally to banks, securities, and insurance, so it can’t eb arbitraged. The simpler the rules, the better the compliance. Think lawyers ever learn that?