Senator Shelby: Dodd Bill Doesn't Fix 'Too Big To Fail'

Alabama Senator Richard Shelby, the ranking Republican on the Senate Banking Committee, has written a letter to Treasury Secretary Tim Geithner voicing his opposition to the Dodd bill's approach to the problem of too-big-to-fail financial institutions, reports The New York Times.

In the letter, Senator Shelby argues that the bill still provides the Federal Reserve with lending powers and gives the FDIC and Treasury Department the authority to guarantee banks' debt during emergencies. And he took issue with the bill's proposed $50 billion fund designed to pay for the termination of failing banks: "The mere existence of this fund will make it all too easy to choose a bailout over bankruptcy," he wrote.

Altogether, these provisions amount to a "backdoor way" to bailouts, he said:

"[The Dodd bill] does not end the problem of 'too big to fail' and will not end the associated moral hazard."

Comments

[Billl]

06:11 PM on 03/30/2010

Easter Resurrection for Democracy

Next weekend let’s have a special session of Congress to establish fairness and justice for the American people by using the same span of time, a few days, as was used to pass out $trillions of bailout taxpayer dollars, for who knows what, because neither the President, Democrats nor Republicans will tell.

Offering amnesty for cooperation or pursuing prosecutions for lawbreakers, who try to hide, would save tons of money and years of time investigating how our country has became so corrupted.

Step one put Eliot Spitzer in charge of an agency of Untouchables to perform hard nosed audits and investigations to sort out the messes and to determine if crimes were committed.

While we are waiting to put away the criminals who won’t come clean let’s establish an Elizabeth Warren version of a stand alone Consumer Financial Protection Agency, reinstate Glass-Steagle, which successfully protected banks and their customers for fifty years before its repeal in 1999, repeal Grahm-Leach-Bliley which allows the unbridled use of financial schemes of mass destruction, repeal the unlimited Christmas guarantees given to Fannie and Freddie, enact the pending legislation to audit the Fed, and make AIG’s records available for public review.

Last step; add a free care Public Option amendment to the Health Care reform bill to eliminate insurance by using sales taxes and give all government funded care only through government hospitals, to serve everyone who wants to use it, and we'll save a $trillion annually.

[MrOctober]

12:17 AM on 03/29/2010

Dodd can't be too hard on the banks, he still has to lock up the nice cushy 7 figure job for when he leaves the Senate next year.

[BKFactor]

12:33 PM on 03/28/2010

And just how much did Shelby receive from the financial services industry?

“Check out:

http://clevelandssecretclub.blogspot.com/2010/03/truth-about-financial-reform.html”

watch both videos

[iceage7]

08:38 AM on 03/28/2010

The Administraion needs a hands on approach on Financial Reform. Mr. President we dont need plugins to the financial system we need an overhaul of the system that works for the benefit of both wallstreet and consumers. First of all with Dodd leading FR most people have lost faith in Dodd and congress.They feel any bill Dodd proposes is a non starter. They feel congress is too compromised by lobbyists. So any reform that comes from congress has little confidence from the people. And if there is another financial crisis people will not look at Dodd but you Mr, president and your legacy. How many people blame the republican committee head of financial reform for the financial collapse. People dont even know who he is..they blame Bush.

The public wants Strong financial reform. This is not a health care bill so support for a strong FR is widespread. Mr. President the public would like to see you take the lead on FR therefore please bring the bill to the WH and craft one of your own. Have Elizabeth Warren who has credibility with consumers and also have the best economists, economists who saw the financial crisis coming people like Roubini, Volker etc and have them write a strong bill that the public can have confidence in. Mr. President public perception means alot. Its gold.

The republicans as usual will come out against the bill.

[iceage7]

08:39 AM on 03/28/2010

Call the republicans bluff by taking the bill to the floor to get voted on.The republicans can either filibuster or vote no and let the public make up their minds who is for wall street and whos for the people.

FR is going to be one of the most important bills in for your presidency. Dont just pass a compromised bill just to say we passed the most sweeping FR in history. If another financial collapse happens people are not going to be thinking of Dodd they will be pointing fingers at Obamas presidency like they did bush even long after his term.

[iceage7]

08:52 AM on 03/28/2010

Then have a FR summit like HCR and let the republicans bring their ideas to the table. At the Summit have your economic team sitting next to you. Elizabeth Warren, volker, Roubini and others who saw the melt down coming. Dont have too many senators or congress since they are bad optics especially since they are part to blame for the crisis. Have serious economists who the public have confidence in.

Also put the bills online so the public can see both democratic and republican bills.

The public will then see who is for wallstreet and who is for the people.

[llmitchellb]

10:15 PM on 03/27/2010

Well fix it!!!!

[HumeSkeptic]

01:33 PM on 03/27/2010

"Despite the banks' ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis," she said. "We're now heading toward a series of votes in which the choice will be clear: families or banks." - Elizabeth Warren, endorsing Senator Dodd's bill.
---------------------
Is Elizabeth Warren also now considered to be in the pockets of big banks, Rockefellers, Rothschild and the New World Order?
.

[sonofsamphm1c]

03:40 PM on 03/27/2010

Simon Johnson is in the camp that actually believes the credit crisis is certain to repeat if banks are not reduced in size. He's wrong, but he's going to go down screeching over and over that the sly is going to fall again.

It is going to fall again, but from our vantage point it is preposterous to think we know now what will cause it then.

[ipogo]

08:53 PM on 03/27/2010

I have a high opinion of Elizabeth Warren, but even her backing of the Dodd bill is tepid at best.

"A source close to Warren notes she is concerned that the new watchdog's enforcement powers may not be vigorous enough and that there are several provisions, such as one governing the treatment of non-banks, which need strengthening. The CFPA debate will continue." (mother jones 3/15/2010)

The big banks are bigger now than they were a year ago, the 6 largest banks now control assets in excess of 63% of GDP, as compared to just 17% only 15 years ago.

http://advisors4advisors.com/index.php?option=com_content&view=article&id=5477:assets-of-6-largest-bank

If they were too big to fail before, and regulators failed to control them, what are they now?

[HumeSkeptic]

01:31 PM on 03/27/2010

While Shelby has a point, it would be nice to see what his proposal is.
Shelby's approach regarding bailout was to let all the troubled big banks fail. That was not the recommendation of any serious economists, on the Right or the Left..

[trollslayer69]

03:46 PM on 03/27/2010

can not add to this comment or this thread. says it all.

[doubtingdavid]

01:21 PM on 03/27/2010

If Dodd the Dud is leading the reform movement, by definition it's a bad bill.

[HumeSkeptic]

01:28 PM on 03/27/2010

"Despite the banks' ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis," she said. "We're now heading toward a series of votes in which the choice will be clear: families or banks." - Elizabeth Warren, endorsing the bill.

[sandzw007]

01:19 PM on 03/27/2010

Many of the recently proposed bills are ridiculous when you read between the lines. Will we every get any real Average American friendly bills introduced or passed? I doubt it. Many of the recent bills proposed slap the hands of the criminals and then give them back their marbles so they can continue to play and cheat us.

[BKFactor]

01:18 PM on 03/27/2010

And just how much did Shelby receive from the financial services industry?

“Check out:

http://clevelandssecretclub.blogspot.com/2010/03/truth-about-financial-reform.html”

watch both videos

[ThomastonPaine]

11:41 AM on 03/27/2010

Senator Shelby,

Please contructively work with Senators Dodd, Corker, Gregg and others on strengthening present financial reform proposals.

Please work to:

Pass a functionally independent Consumer Financial Protection Agency
Pass the Volcker Rule and end proprietary trading.
Restore The Firewall of Glass Steagall
Pass Responsible and Effective Regulation of Derivatives--transparency--clearinghouses
(Investor protections)
End Off Shore Exemptions
End Naked Credit Default Swaps--Legitimate Hedging is Good but these are wholly negative speculative instruments
Pass a Windfall Profits Tax On Wall Street
Effectively End Too Big To Fail

Thank you,

[sonofsamphm1c]

12:18 PM on 03/27/2010

Define proprietary trading.

If you can, you'll be better than Volcker.

[sandzw007]

01:20 PM on 03/27/2010

I'm with you!

[hypnotoad72]

09:30 AM on 03/27/2010

And if McCain were in office, would Senator Shelby be just as critical?

(I suspect the answer to this, just like the one regarding drug use, is just saying "No".)

[greyhound2]

09:14 AM on 03/27/2010

With those leading the "reform" effort the same people who were the cheerleaders on the way to collapse, and the influx of $150 million in lobby interest from commercial banks poured on the scene, anything meaningful as an outcome looks doubtful. You know its coming, and the best you can do is to position yourself to minimize the damage when the next suprise arrives.

[Sally1952]

11:39 PM on 03/26/2010

Well, Senator Shelby, this is what happens when you and Senator Corker, and the other 9 Rethugs on the committee refuse to work with the Democrats in a bipartisan way. Continue being the party of no, or now it is the party of h3ll no, and this will be the outcome every time. Own it- or gr0w a set.

[PhilipTaylor]

11:17 PM on 03/26/2010

TWO DISH0NEST SENATORS DO NOT MAKE AN H0NEST SENATOR!

[Carolab]

11:57 PM on 03/26/2010

PT, did you see Gretchen Morgenson on Bill Moyers Journal tonight?

http://www.pbs.org/moyers/journal/03262010/profile.html

[PhilipTaylor]

05:55 AM on 03/27/2010

1. Gretchen Morgenson says, "the bills we have seen have been are so half-baked, and do not address the crucial elements of reform needed to prevent this kind of crisis from happening again."

2. Bill allow banks to grow "too big to fail," and get so big they risk the whole economy.

3. Morgenson argues, "You have to increase the amount that a bank would pay if it gets over and above a certain size in assets. You have to increase the cost of doing business for these entities if they grow too big. Put money they pay into an FDIC type of an insurance fund...make it costly. That's something these people understand."

4. Meaningful reform is difficult in Washington, as lobbyists far outnumber legislators, and wealthy industries fund campaigns. Members of Senate Banking Comm received over $39Million from Wall Street and House Financial Services Comm raked in more than $21Million Plus $150 Million to Lobbying Firms - So WHY true reform?

5. “Too big to fail” companies grew so politically powerful in THEORY they cannot fail so they TOOK EN0RM0US RISKS backed by Taxpayers. “You have to make it expensive to grow in size and take on very large risks that threaten the entire financial system. You have to increase the amount that a bank would pay it if it gets over and above a certain level.”

[PhilipTaylor]

06:00 AM on 03/27/2010

6. Instead they GOT BIGGER Bear Stearns, Lehman, Wachovia, and Merrill were tossed into BIG BANKS TO MAKE MEGA BANKING M0NSTERS!

7. DELAYS: Money interests STOP REGULATION to Continue Profitable SCAMS.

8. Banksters “have the temerity to come out of their holes, right, after driving the nation into the drink? ..I'm..stunned watching the brazenness..they operate now.

9. “This culture of idolizing (powerful) CEO’s who make enormous amounts of money..surrounded by yes people..like rock stars. It takes a unusual person to say, "I have to do the right thing, not just for me, but for all the stakeholders in America. There is a sense..these people..are thinking only of themselves..and been rewarded by being bailed out.”

10. It is a “dysfunctional arrangement that rewards bad behavior, because you're allowing them to privatize their gains...but when they get into trouble, you socialize the losses. The taxpayer has to pay them.”

11. D0DD Bill “doesn't really address too big to fail before it happens. There is some language about how we would unwind these entities. (MISSING is) to never let these institutions get to the point where they can threaten the entire financial system.”