Bureaucratic morass of the Dodd/Frank boot-to-the-face
Well, thanks to two Maine RINOs and Scott Brown from Massachusetts, the monstrous Dodd/Frank boot-to-the-face “reform” bill has cleared the senate. Our dear comrade leader will sign it shortly. Gird your loins and BOHICA. Just in case you’re one of the 20% of Americans who believe this bill will actually fix anything, here’s an article (from the Wall Street Journal) that might disabuse you of that belief.
…Dodd-Frank, with its 2,300 pages, will unleash the biggest wave of new federal financial rule-making in three generations. Whatever else this will do, it will not make lending cheaper or credit more readily available.
In a recent note to clients, the law firm of Davis Polk & Wardwell needed more than 150 pages merely to summarize the bureaucratic ecosystem created by Dodd-Frank. As the nearby table shows, the lawyers estimate that the law will require no fewer than 243 new formal rule-makings by 11 different federal agencies.
The SEC alone, whose regulatory failures did so much to contribute to the panic, will write 95 new rules. The new Bureau of Consumer Financial Protection will write 24, and the new Financial Stability Oversight Council will issue 56. These won’t be one-page orders. The new rules will run into the hundreds if not thousands of pages in the Federal Register, laying out in detail what your neighborhood banker, hedge fund manager or derivatives trader can and cannot do.
And since the language of these onerous regulations may not be completed for months or even years, the full impact cannot be known. Fantastic. More uncertainty to keep business from expanding and hiring.
Because Congress abdicated its responsibility to set clear rules of the road, the lobbying will only grow more intense after the President signs Dodd-Frank. According to the attorneys, “The legislation is complicated and contains substantial ambiguities, many of which will not be resolved until regulations are adopted, and even then, many questions are likely to persist that will require consultation with the staffs of the various agencies involved.”
In other words, the biggest financial players aren’t being punished or reined in. The only certain result is that they are being summoned to a closer relationship with Washington in which the best lobbyists win, and smaller, younger firms almost always lose. New layers of regulation will deter lending at least in the near term, and they are sure to raise the cost of credit. Non-blue chip businesses will suffer the most as the financial industry tries to influence the writing of the rules while also figuring out how to make a buck in the new system.
The timing of Dodd-Frank could hardly be worse for the fragile recovery. A new survey by the Vistage consulting group of small and midsize company CEOs finds that “uncertainty” about the economy is by far the most significant business issue they face. Of the more than 1,600 CEOs surveyed, 87% said the federal government doesn’t understand the challenges confronting American companies.
And, believe it or not, even the two assclowns who wrote this mess admit that they f**ked it up. Huh? WTF?
Believe it or not, Mr. Frank has already promised a follow-up bill to fix the mistakes Congress is making in this one. In a recent all-night rewrite session, he and Mr. Dodd made a particular mess of the derivatives provisions. They now say they didn’t really mean to force billions of dollars in new collateral payments from industrial companies on existing contracts that present no systemic risk. But that’s precisely what the regulators could demand under the current language, and the courts will ultimately decide when everyone sues after the new rules are issued.
Taxpayers might naturally ask why legislators don’t simply draft a better bill now. But for Democrats the current and only priority is to pass something they can claim whacks the banks and which they can hail as another “achievement” to sell before the elections.
UGH. This is what it’s come to. No wonder public support of congress is in the toilet.
This transfer of wealth is a tax by any reasonable definition, borne by the customers, shareholders and employees of the companies ordered to pay it. Is this how Mr. Brown plans to reward the tea partiers who carried him to victory last winter in Massachusetts? Is this the key to a small business rebound in Maine?
A good definition of a bad law is one that its authors are rewriting even before they pass it. The only jobs Dodd-Frank will create are in Washington—and in law firms like Davis Polk.
There is, however, at least one senator who understands that this toxic stew of faux “reform” will be a disaster. This piece by Tom Coburn (R-OK) is worth a read, if for no other reason than to give you hope that not all congressmen are space aliens.