Madoff to Head Banking Regulation

Now that I have your attention, I want you to realize that this headline might as well be true. Sen. Chris Dodd has been “the man” within the Senate Bank-ing Committee since well before the tragic collapse of our financial system. He allowed Fannie Mae and Freddie Mac to become a cesspool of junk mortgages. He allowed banks to become brokers and brokers to become banks. Now here he is unveiling a new finance regulatory reform bill that fixes nothing. Why are we allowing one of the people responsible for our financial failure to define the new rules going forward?

Sen. Dodd’s new bill of financial regulatory reform doesn’t address the key causes of the economic crisis. Let’s be clear what caused our problems: the Fed was too loose with their monetary policy, Fannie and Freddie were allowed to guarantee almost $1.5 trillion in junk mortgages, and as we have reported in previous articles, there was a total failure to regulate Credit Default Swaps.

How Sen. Dodd can ignore the Credit Default Swap issue is beyond me. Credit Default Swaps are insurance policies on bonds. Currently there is no transparency or margin requirement. How can you allow companies to write these policies without any collateral? This is what helped sink AIG and Lehman. It would be a simple process to create transparency on these financial devices, since we already require all other commodities to be traded through clearing houses and have collateral.

Finally, the use of mark-to-market evaluation for bank loans works in the favor of large companies and hog ties financing to small businesses. Please explain to me how this will aid the growth of jobs? It’s clear that Sen. Dodd and his committee have no clue and need to take a pass on this legislation. We can wait a year until we replace the current legislators with people that actually care about the future of the American people.