by Scott Creighton
Hillary Clinton was waving around the myth of Dodd-Frank last night during her debate with Bernie Sanders (watch it here) like Rudy Giuliani used to wave 9/11 whenever he gave a speech or took part in a debate.
“We have a law!” she screeched, over and over again.
Of course, what she doesn’t tell you is, a law is meaningless if no one does anything with it. Kinda like that law that said public officials couldn’t use private email accounts to conduct their daily business so they could erase whatever communication they didn’t want to be part of the public record.
The myth that is the Dodd-Frank law has existed long enough in my opinion. Let’s put it to bed, shall we?
When asked by the Wall Street Journal last year what was the single biggest accomplishment of Dodd-Frank, former Sen. Christopher Dodd (D., Conn.) said:
“I think the [Financial Stability Oversight Council] is important, I think the too-big-to-fail [wind-down authority] is important. A major officer at a bank called a few weeks ago and said, “I never thought I’d make this call to you… but I want to tell you: We’re a better bank today because of your law.” Dodd, 2015
It was disclosed last week that the Big Banks have no “living wills”, they have no “wind down” plans and in my opinion, they never intended to make one because they never intend to die or ‘wind down”
“The Federal Reserve and the Federal Deposit Insurance Corporation said on Wednesday that five of the nation’s eight largest banks — including JPMorgan Chase and Bank of America — did not have “credible” plans for how they would wind themselves down in a crisis without sowing panic” New York Times, April 13, 2016
So if this is the case as of yesterday, what on earth was Chris Dodd talking about back in 2015?
And that is what he considers the most significant success of Dodd-Frank? A “wind down” clause that no one is paying attention to?
When President Obama signed Dodd-Frank into law back in July of 2010, he said “These reforms represent the strongest consumer financial protections in history,” and “The American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more taxpayer-funded bailouts. Period.”
With all due respect to Barack Obama, the strongest consumer financial protection in history was Glass-Steagall… and Hillary Clinton’s husband destroyed that back in ’99 at the behest of his financial advisors who had ties to Big Banking. They also attacked Brooksley Born when she tried to regulate the very kinds of financial instruments (over the counter derivatives) that would later be used by Big Banking to topple the economy and passed legislation which made regulation of those instruments illegal in the future (ensuring the weapons of mass economic destruction would remain in place and untouched)
Back in 2012, Matt Taibbi gave us a little history into real financial industry reform which I think is worth remembering in terms of Obama’s obviously misleading statement (and Hillary’s continued screeching about Dodd-Frank):
“Upon entering office, FDR was in exactly the same position Obama found himself in after his inauguration in 2009. Then, as now, the American economy was in tatters after the bursting of a massive financial bubble, brought on when speculators borrowed huge sums and gambled on unregistered securities in largely unregulated exchanges. This mania for instant riches led to an explosion of Wall Street fraud and manipulation, creating a mountain of illusory growth divorced from the real-world economy: Of the $50 billion in securities sold in America in the 1920s, half turned out to be worthless.
Roosevelt’s response to all of this was to pass a number of sweeping new laws that focused on a single theme: protecting consumers by forcing the business of Wall Street into the light. The Securities Act of 1933 required all publicly traded companies to register themselves and offer prospectuses to investors; the Securities Exchange Act of 1934 forced publicly traded companies to make regular financial disclosures; and the Commodity Exchange Act of 1936 required all commodities and futures to be traded on organized exchanges. FDR also created the FDIC to protect bank depositors (through an insurance fund paid for by the banks themselves) and passed the Glass-Steagall Act to separate insurance companies, investment banks and commercial banks. Post-New Deal, if you put money in a bank, you knew it was safe, and if you bought stock, you knew what you were buying.” Matt Taibbi, Rolling Stone, 2012
As far as the president’s statement about “no more taxpayer-funded bailouts. Period.” goes… (QE timeline)
- November 3, 2010 – “This is the second time the Fed engages in quantitative easing…”
- September 21, 2011 – “Federal Reserve moves to lower interest rates on consumer loans with a $400 billion debt-swap program“
- September 13, 2012 – ” the Federal Reserve decides to launch a third round of open-ended bond purchases — so-called QE3 — saying it will buy $40 billion of agency mortgage-backed securities per month.”
- December 12, 2012 – “The Federal Reserve announces a fresh bond-buying program worth $45 billion per month of longer-term Treasurys …”
- December 2012 – Actually, QE3 remained in place and when combined with the new 45 billion, that made a total of 85 billion dollars a month being pumped into the banking industry to offset the bad loans they created… or QE4 as it was called – “Combined with QE3, the Fed will be taking $85 billion in bonds, both Treasuries and MBS, out of the market. The FOMC also decided to begin rolling over its maturing Treasuries as of January.”
Officially, the extended bailout program called Quantitative Easing, ended in Oct. of 2014 (while it surged in other countries across the globe) and the Fed held some 4.7 trillion dollars in worthless assets bought back from the Big Banks who created them in the first place.
That’s 4.7 trillion dollars of “on the books” bailouts as a total compared to that first .785 trillion TARP bailout that Obama said Dodd-Frank made sure would never happen again. The “off the books” backdoor bailout was even larger.
There had been one single part of the Dodd-Frank legislation that was worthy of note: the so-called “push-out rule”
That rule stipulated that no insured depository banks could hold dangerous derivatives and swaps on their books. Seems to make sense considering how the Big Banks used those UNREGULATED instruments to destroy the economy, right?
Of course, that rule was “pushed-out” to be implemented in 2016, this year.
But of course, par for the course, Big Banking made sure that didn’t happen:
“Warren noted that the Dodd-Frank legislation was passed in 2010 but the Fed had stalled the implementation of the push-out rule until 2016 – long enough for Citigroup to eventually have it repealed, a feat which it has now accomplished.” Wall Street on Parade, 2015
That’s right. The one thing Dodd-Frank did that would have helped our economy and protect us from the financial terrorists that are Big Banking, was repealed.
When you think about it, the push-out rule was basically tantamount to a court telling a convicted serial killer he couldn’t keep AK-47s in his closet… and they pushed it back until this year and eventually did away with the whole thing altogether.
So John Wayne Gacy still has his stockpile of firearms just waiting for the voices to start up again I suppose.
The big banks are larger than they were in 2008 and still larger than they were in 2010 when Dodd-Frank was signed into law. They’ve been gobbling up smaller banks at an accelerated rate with no hindrance from the legislation and in fact, many believe it actually made it easier for the consolidation of the banking industry.
“The nation’s largest banks are “a perversion of capitalism” and “a clear and present danger to the U.S. economy.” The Dodd-Frank financial reform legislation passed in the wake of the crisis “may actually perpetuate an already dangerous trend of increasing banking industry concentration.”
These arguments come not from an Occupy Wall Street activist, not from a Tea Party member, but from a scathing report released last week by one of the nation’s top banking regulators, the Federal Reserve Board of Dallas. In a column for ProPublica and The New York Times, reporter Jesse Eisenger described the report as “a radical indictment of the nation’s financial system.” Frontline, 2012
This is the truth of Dodd-Frank. It is a useless bill designed to aid the Big Banks, not curtail them in any meaningful way.
This is the history of Dodd-Frank. It hasn’t been used to protect us from the greed and ambition of the Big Banks, but rather to serve as a catalyst for those deadly sins of theirs while simultaneously proving a smoke screen for unscrupulous politicians like Barack Obama and Hillary Clinton.
This is not a controversial conclusion I have come to. Dodd-Frank has it’s detractors on both sides of the fake political divide and it’s been clear since day one it was written for Big Banking, not us. That is, unless you forget Chris Dodd was a “Friend of Angelo”
Unfortunately for Sen. Sanders, he can’t openly call out Hillary when she starts ranting about Dodd-Frank because he voted for it.
I can though.
The fact that Hillary Clinton keeps citing this horrible legislation as the end-all-be-all to every question about regulating and reigning in Big Banking only proves her worth to Big Banking and the likes of Goldman Sachs.
Every time she does that, Wall Street bankers drink a shot of $500 a bottle whiskey, laughing uncontrollably. She wraps herself in the mythology of Obama as some sort of “progressive” modern version of FDR and pretends Dodd-Frank is some kind of new Glass-Steagall. Unfortunately, most of her supporters are either in on the joke like her friends at Goldman Sachs, or they are too desperate, lazy or ignorant to know the truth about what Dodd-Frank has done lo these past 6 years.
I just wish she would stop screaming about Dodd-Frank every time someone mentions anything about Big Banking. It’s an insult to the intelligence of some of us out here.
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