IBD on Deformed ‘Financial Reform’
Maybe it’s time for “FRINO,” a new acronym that would stand for “Financial Reform In Name Only.”
On second thought, the reality as described in the last two excerpted paragraphs below from an Investors Business Daily editorial Friday evening is much more sinister than that, rendering such an acronym an inadequate descriptor:
For instance: Fannie Mae and Freddie Mac, which were inarguably at the heart of the financial crisis, and which have already cost U.S. taxpayers $146 billion (with hundreds of billions more on the way), aren’t addressed in this bill at all.
This is insane, given the role these two government-sponsored enterprises played both in encouraging lending to poor, unqualified homebuyers and repackaging those securitized loans for resale to banks and investors around the world. (Ed. Note: The repackaging was also done in a systematically fraudulent manner for about 15 years.)
Worse, the bill does nothing to amend the “too-big-to-fail” doctrine that has guided U.S. banking policy for decades. Any bank that runs into trouble can still walk up to Uncle Sam’s borrowing window and, hand outstretched, ask for money. And if the bank is politically connected or very large, it will get it.
This puts every small bank, investor or lender at a huge disadvantage, since they’re most certainly not “too big to fail.” This is a big reason why the biggest U.S. banks didn’t squawk too much about the legislation. As bad as it is, it gives them a competitive edge.
… The bill also gives federal regulators sweeping new powers to seize and break up financial firms. Good idea, you say? Remember: The government also gets to decide what is a “financial” firm. Does GM, which makes loans, fall into that category? How about Wal-Mart, which issues its own credit cards?
In effect, this lets the government seize and dismantle the assets of almost any company — and then force others to pay for it.
This enables those who would wish to exercise such powers to engage in financial tyranny. Not even angels, let alone the dictator wannabes in this administration (Example 1: John Holdren; Example 2: Zeke the Bleak Emanuel; Exhibit 3: Cass Sunstein), should be entrusted with such unaccountable command-and-control authority so easily abused for politic
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