Too Big Not to Get Right

While I'm doubtful Congress will accomplish a whole lot post-healthcare – and, most importantly, during an election year – there is sure to be a little movement on the financial reform issue. For those of you who don't remember, the House passed its own "reform" legislation last December. H.R. 4173, the so-called Wall Street Reform and Consumer Protection Act, was a 1,300-page bill that would unduly expand the federal government's regulatory power over our free market while continuing to put taxpayers at risk with serious liabilities. There were two provisions in the bill that gave us particular concern:

Consumer Financial Protection Agency – Yet another bureaucracy would be created under H.R. 4173. A politically-appointed credit czar would then be given unprecedented oversight of the financial services of any business that provides loans, credit, or repayment plans. This includes retailers, telephone service providers, publishers, and even hospitals.  

Financial Services Oversight Council – This new Council would be responsible for determining which companies are supposedly at risk to undermine financial market stability, and would be granted $150 billion as a permanent placeholder for future bailouts.

This is just a snapshot of the many pages of bureaucratic red tape we find in H.R. 4173. The Senate bill, championed by Senator Chris Dodd (D-CT), would do much of the same and fail to take us any closer to true financial reform.

There is a great editorial in today's Wall Street Journal on the Dodd bill and how it would actually make financial bailouts more likely! The author provides Citigroup as a prime example of why big government is not wise enough to prevent systemic risks and restore America's financial market.

"Citigroup was one of the most regulated institutions on the planet, yet it was allowed to build up tens of billions in off-balance sheet mortgage assets. To believe regulators will prevent the next crisis is to make another one more likely."

Insightful article – I encourage you to check it out!

We hope Congress will move to clear away unnecessary regulations, streamline the rules that remain, empower investors to make their own informed choices, and end the moral hazard created by bailout guarantees.

As debate moves forward, we'll continue to keep you apprised of changes to the Dodd bill.