Financial Reform Legislation Needs Work
The financial reform legislation being considered in Washington will pass in some form. It will pass because 65% of America views the banking and financial services industry as evil and wants it punished for both its perceived and actual transgressions. It will also pass because the legislation will establish additional controls on the industry, even though adequate controls are probably already in place and what has been lacking is enforcement. The legislation being considered certainly has some good attributes, but it also contains enough bad features to suggest major modifications are needed before it is passed. It is good that it will attempt to regulate derivatives, but these financial instruments should be prime candidates for outright prohibition because they have virtually no underlying support for their value as their value is essentially determined by investor speculation. The legislation's sponsors taut that the $50 billion bailout fund to be setup will not cost taxpayers a penny. While this representation may be technically correct, this fund is really nothing more than another slush fund to be doled out by Washington politicians for votes, and it will be paid for by the public, albeit not taxpayers per se, in the form of higher bank and financial services company fees. The legislation will give the Secretary of the Treasury almost singular authority to determine when a company has become "too big to fail" and to break up such a company and take it over by firing its Board and officers. The person who is to be granted this authority has admitted he did not fully pay his income taxes for several years. He has also asked America to believe there is no way he would cheat on his taxes, that his tax problem resulted from the fact he was simply did not understand how the TurboTax program works. I am really reluctant to give this person, or any person for that matter, such authority. I also have great difficulty accepting the premise that any company is worthy of being considered "too big to fail."
The legislation does nothing to regulate those out-of-control financial giants, Fannie Mae and Freddie Mac, who are expected to shortly arrive at the trough of government plenty asking for trillions of dollars of taxpayer bailout money in order to avoid insolvency. One has to wonder if this blatant omission is because these entities have over the past few years become great tools for redistributing income, a stated objective of our current President. Finally, the Senate and House financial reform bills have been crafted under Chris Dodd's and Barney Frank's oversight. These notorious bill crafters are the same two men who over a decade ago drafted the laws that encouraged, and granted authority to, Fannie Mae and Freddie Mac to buy sub-prime loans that had been made to high-risk borrowers who probably never should have been approved for a loan in the first place. It is these very loans that now comprise a large share of the bad loan portfolio in this country, and which have contributed mightily to our present housing and financial crises. I contend we should not place our trust in a 1,300 page bill drafted by these men without a full and complete analysis of its consequences, both intended and unintended.
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