Dodd's Dud

You may be wondering why you haven't seen a post overview on the latest Senator Dodd's Financial Reform Bill, Restoring American Financial Stability Act of 2010 (link has legislative summary and text). That's because, as usual, it's a dud.

Firstly a few summary points are listed here. The Huffington Post has a list of other criticisms, including the political on Dodd 2.0. Also, yet another New York Times op-ed points to the well known fact, putting the CFPA under the Federal Reserve will de facto kill consumer financial protection.

Make no mistake, the Republicans aren't in the people's camp either on this, now looking to just run out the clock.

Paul Volcker, testifying before the House Financial Services Committee, who has been blown off in his policy recommendations by the Dodd Dud, testified that regulators cannot be trusted to do anything (and isn't the proof in this pudding!) and this is why you need to break up commercial banking from investment banking.

In my opinion, it's very unlikely that the regulators and supervisors would evoke a strict prohibition until a crisis came and then it's too late," Volcker said. "That's why you want it in legislation."

Dylan Ratigan has a piece, below, on a Senator Dodd staff lawyer, busy buying the dirt cheap Zombie bank stocks right before the bail outs. Now that's interesting because most were shorting those to the point naked shorts were temporarily banned.



Which leads to this question, why are we, one and a half years later, still getting watered down bills presented as reform with Senator Dodd so bad, at this point I personally will not bother to read the legislative text. It's like the same song, different verse, as if time somehow will make the public believe this isn't a shell game instead of real reform?

Mike Konczal takes a different analysis point and asks What would Goldman Lobbyists Hate About the Financial Reform Bill?

I want to approach it from a different angle: What would an investment bank hate about this bill, and lobby hard to change? I actually read this bill as if I was a Goldman Sachs lobbyist, looking for all the sections that I hated and made a list of what items I needed to lobby hard on to kill or modify.

My final verdict, by the time I got to the end? If I was a Goldman lobbyist, I’d probably shrug and go “eh, pass it.”

He then puts up a challenge (calling all bloggers!) to find something Goldman Sachs would hate. Trust me, lobbyists will fight anything, anything, no matter how ineffective, how trivial and how little it matters, will millions of dollars. Case in point is Say on Pay.

Can I find anything meaningful in this bill? Well, one thing is a real time data collection mandate, for the Federal Reserve. This kind of modernization of raw data collection by our government should be done across the board, especially in labor force statistics. Problem is, implementation is in the details and I notice there is a clause which denied public viewing of this data.

That said, the thing which disgusts me the most, when we know the #1 cause of the financial crisis was derivatives, is how there isn't any meaningful derivatives reform and that includes the House bill too. There are loopholes and exemptions galore. It's so bad, it should be called the swiss cheese clause. There are even plans by Corporate representatives Senators Gregg Judd and Jack Reed to add end user exemptions, masked as legitimate commodities hedging by businesses, which of course will be used by the Zombie banks since they control the derivatives market.

Of any focus in the media, especially the regular people, is on the CFPA, but the real meat, in desperate need of strong reform, are derivatives. Completely unregulated, CDSes, CDOs built on fictional mathematics, credit ratings agencies slapping on bought and paid for AAA's, as fictional stamps of approval, on such lovely financial innovations, such as a \fs1 CDO\fs2^n. These are the things that need to be banned, regulated, 100% and in the public sphere. We have a $600 trillion dollar, completely unregulated gambling casino, now even putting sovereign nations at risk. We know it's hard to wrap your head around these things, but that's what blogs are for. Realize the number one place for theft by these glorified white collar criminals is always buried in some bizarre convoluted spreadsheet, crafty formula con muchas las matemáticas, and obscure rules somewhere. Banksters do that, so you won't figure it out!

Again, Dylan Ratigan, who I am obviously becoming a fan of, overviewed the bill fairly nicely and check out the section on how the Zombie banks are also 97% of the derivatives players.



There is pretty much only one thing Senator Dodd is correct on, this legislation will not stop the next crisis from coming. Uh, nope your bill sure won't.




This is an excellent recap of Dodd's effigy. He will go down in infamy, as he deserves to. That is funny about the 16 months.

Nice: "Right. All you have to claim is this isn't your main business and wala, you are exempt. There will assuredly be more. After all, why regulate the #1 element which brought down the globe and has us in hock past our asses? " CDS, the belle of the ball retains her crown.

They could do two things right away. Restore Glass-Steagall and repeal the Commodities Futures Modernization Act. That's what started it. I have a question for you. A week ago, the President of the European Commission said this: "In this context, the Commission will examine closely the relevance of banning purely speculative naked sales on Credit Default Swaps of sovereign debt."

What if they actually did this? What would the impact on the CDS market be? The European sovereign debt market must be a significant part of the overall CDS market (I presume, don't know).

Could this move by Europe crash the CDS market?


I posted a few paragraphs of the article in the following blogs with a link to Economic Populist. Getting the word out:

The Agonist
COTO Report


glad you like it

There is also the "share this" button but frankly I've had no luck with a lot of those. To me it's almost a mystery on which posts get picked up on, but the good news is I am positive we have a whole lot of intelligent readers, which means we have to be doing something right.

We need to do a follow through on what derivatives reform should look like. It has to be the most complex, maze of confusion, which is one of the reasons I don't think it is getting attention (besides the fact the Banksters are lobbbying night and day to leave it all untouched). I have to be careful on this and reference the obvious and also point out legitimate uses of them, which do actually exist (surprise).

I had a thought here

In thinking about sovereign debt and CDSes plus credit rating the Banksters and the credit ratings agencies literally have more power than sovereign nations?

With a credit ratings downgrade they can toast an economy due to increased interest rates on the national debt. With CDSes they can cause the cost of borrowing to increase.

I don't want to sound CT here but looking at what is happening with Greece, plus the notorious "turn to the IMF" who seems to always love agendas which wipe out the workers, middle classes....

Not CT, but a conspiracy scholar am I

Which leads to this question, why are we, one and a half years later, still getting watered down bills presented as reform with Senator Dodd so bad, at this point I personally will not bother to read the legislative text.

And the answer is at this site.

And in regard to this,

I don't want to sound CT here but looking at what is happening with Greece, plus the notorious "turn to the IMF" who seems to always love agendas which wipe out the workers, middle classes....

And please don't forget Iceland, Latvia, Ireland....

The global financial virus of concentrated ownership of credit derivatives (JPMorgan Chase, Goldman Sachs, Morgan Stanley, and bringing up the rear, Citigroup & BofA) grants awesome power, and then the misdirection and global securitization by the World Bank's IFC, which wants everything to be privatized, and is always pushing the privitization of public education everywhere.

And President Obama has appointed Simpson and Bowles to address the deficit, and the first words out of Simpson's mouth are about the privatization of those "entitlements" (Social Security, Medicare, etc.), while ignoring the biggest entitlement in America's history, the monetization of that once-private debt, which was shifted over to the public arena by all those debt-financed billionaires.

This Sunday: a vote on extending private insurance - referred to by one group of crazies as a "government takeover of the healthcare" (?????), and by another group of crazies as "healthcare reform " (??????).

It all looks like privatization to me.

And the end result? The promise of a dramatic increase of future remittances to the health insurance industry, and the pharmaceutical industry, yields a dramatic increase in the amount of leverage they wield, as well as evermore categories of credit derivates they will securitize.

good link

we have hundreds, literally, of posts on EP explaining derivatives. I need to do a huge overview piece with all of the references. That's the problem, even people who have a lot of knowledge, skills in finance and economics have a hard time keeping it all straight and comprehensible.

That's an excellent point

My paradigm is that The Money Party runs everything. National entities are there to be used. When there's an intra party squabble, they have a war, but they make money on that. It's no conspiracy because anyone paying much attention figures it out sooner or later.

As for the power of the financial institutions and manipulators over nations, that would be a great case to make. Quantifying it is important. But there's Soros crashing currencies around the world and I'm sure others.  Where would one start to qualitfy this?

Dodd is retiring for a reason

It's not really a coincidence that Dodd decided not to run for re-election as he began working on this bill. He knew it would be a sell-out; the plan is to take the plum job that will be handed him as he leaves office. He will be paid well for whatever loopholes installed in the bill so that it is useless.


I'm always amused when I hear people say, "Well, he's on his way out so he can write a strong bill." When has that ever happened? Dodd wanted out, so he fixed the bill for Wall Street and his wife. They have no shame  because they feel fully justified, until they skulk into the dark corners of their minds. and in engage in some ritual humiliation.

I used to have sympathy for Dodd for having to see his father endure a scandal  But this is far beyond any ethical problems his father had.  He is Alexander to his father's Peter.


Short of the following

financial regulatory reform is worthless:

1) Make banks and financial sector smaller - either through hard 'Glass-Steagall -type' rule, Volcker Rule or much higher capital requirements. Regarding, proprietary trading, and this something Michael Lewis points out, why do we allow financial conglomerates advise their clients to buy/sell certain investments and at the same time allow them to take trading position in the opposite direction.

2) Derivatives: As Michael Collins suggests: repeal CFMA and specifically declare purely speculative OTC derivatives legally unenforceable. Here is a good article explaining this.

3) Rating agencies - prohibit rating agencies from getting paid by securities issuers.

4) Consumer Financial Protection Agency: CFPA must be independent, with it's own budget, rule-making authority and enforcement authority. Anything short of this is NOT a victory.

Bottomline: FIRE sector must be made smaller and more accountable. Some people argue that this will come at a cost and I don't disagree with that but we have incurred trillions plus a global financial crisis for allowing FIRE to run hog wild for over 20 years. Something tells me we will survive with a much smaller FIRE sector. - Financial Information for the Rest of Us.

bloomberg latest on Greece and increasing borrowing costs

We were talking about naked CDS on sovereign debt. Bloomberg has the latest on Greece making their payments and it sure does appear that naked CDSes are causing increased costs...

where have we seen this before? You're broke, need a break and wala, magically your credit card interest is now 29.9%.

BTW: If anyone wishes to take on global sovereign international debt "trading" games, whatever you do, make sure it's well cited and researched, but it looks like a good thing for EPers to learn more about.

here's one positive thing

Sheila Bair, FDIC chair, points to back door bail out on rule 13 by the Fed, which supposedly Dodd will "plug up"...
now "plug up" so often is then buried, deep in legislative text some damn outrageous loophole which makes a clause in effective.

But looks like we'll have to read the bill eventually after all (the text itself, not the summaries).

Here is the actual Bair Speech

we do have serious concerns about other sections of the Senate draft which seem to allow the potential for backdoor bailouts through the Federal Reserve Board's 13(3) authority. We will work closely with the Senate to make sure there are no loopholes around the carefully crafted resolution procedures.

Dodd Schmodd

Of course the Dodd bill is a disaster, what else would you expect from a maggot of Dodd's description? The lot of them are maggots, whores, stem to stern, and all the big sis, Elizabeth Warrens in the world are simply background noise to the inexorable operation of their self-service apparatus. Yesterday, "progressives" felt they could rely on a "no" vote on insurance care from Dennis Kucinich, only to have Dennis pee on them from a rather short distance. And yet it is said that if we don't provide congressional salaries generous enough for them, we won't attract "quality" people to these jobs! Why their very focus on salaries ought to be diagnostic in helping the people to root out, detain and interrogate these bacteria.

Except to upset ourselves over them, I see no purpose whatsoever in examining the minutea of bills brought by the vermin in the United States Congress. Who is ever deceived by their content? Better to focus on the more promising possibility of a restoration both of our democracy and our economy and a future repleat with show-trials for these scum.