Wednesday, April 14, 2010
"Socialists believe that the way to paradise is for governments to own 'the means of production'. ... Today's neosocialists are smarter than their ancestors. Instead of outright takeovers, they are achieving much the same goal through rigid regulations. ... Entitlements go hand in hand with sweeping, overbearing regulations. President Obama wants higher education in this country to be free of charge, which is why his Administration is pushing for a government takeover of student lending. ... Senator Chris Dodd's (D-Conn.) recently unveiled package of financial regulatory reforms is a neosocialist's dream. It is also destructively stupid. The bill doesn't address the key causes of the recent economic crisis: the Fed's too loose monetary policy, the behavior of Fannie Mae and Freddie Mac in buying or guaranteeing almost $1.5 trillion in junk mortgages and the failure to properly regulate credit default swaps and other derivatives. ... In the name of fighting Washington's too-big-to-fail doctrine for major financial institutions, Dodd's bill is a de facto institutionalization of them. ... Thus these biggies, like Fannie and Freddie, will have lower costs of borrowing--debt is by far the biggest component of their capital--which will put their smaller competition at a crippling disadvantage. ... Thus the paradox of today: bargain-basement rates of interest for larger firms and higher costs--or no credit at all--for smaller borrowers. ... Chief among its tasks would be assessing the risk of banks and their products and activities, yet Washington has demonstrated that it is incapable of judging risk. ... Sensible debt-to-equity ratios, including stiffer equity requirements for volatile short-term debt, and clearinghouses for almost all derivatives would effectively accomplish what Dodd's monstrosity purports to do and manifestly does not", Steve Forbes (SF) at Forbes, 12 April 2010, link:
Amazing. I agree with SF. The Dodd bill will not reform the TBTF banks. Feature or bug?