We are facing huge long-term problems: a real unemployment rate of 18%, dysfunctional banks that are "too big to fail", a regressive tax structure that's stifling economic growth, prisons that are bursting at the seams, urban schools that are struggling, a health care system that still needs major reform, the lack of a coherent national energy policy that will protect our economy and the environment, and a government that has been encroaching on our civil liberties. For decades we have lived with irresponsible public policies from career politicians in Congress who care more about increasing their party’s power and getting re-elected than they care about solving long-term problems. They haven’t been honest with us, and they have been lousy public servants.

I’m different. I do not want to be a career politician. I am not a Democrat or a Republican. I’m a Problem Solver. I want to force members of Congress to be responsible, and implement sustainable solutions to real problems. Please read the positions I present on this website, and spread the word to friends and family.

Please email me at John@Mertens2010.com, and become a supporter on Twitter at @mertens4senate or Facebook: John's FB

Wednesday, November 11, 2009

Too Big to Fail: Chris Dodd's proposed regulatory bill falls short

You can read a discussion about Chris Dodd's proposed regulatory bill (announced yesterday) here:
I believe that the proposal would do some good things (create better oversight of some banking functions), but that it consolidates too much oversight into one agency (imagine the still powerful banking lobby being able to target just one agency!), and that some parallel oversight should be left with the FDIC. Here's a statement from Simon Johnson, MIT Professor of Economics and Senior Fellow of the Peterson Institute for International Economics: "Well, the key is, obviously, you want a tough regulator going forward. You want an institution or a set of institutions that aren't going to be captured by the banks."

But this is not the biggest weakness of the proposal; the most important thing that new regulatory legislation should do is prevent banks from becoming "too big to fail". This is the biggest reason for our current economic disaster. Again from Simon Johnson, MIT Professor of Economics and Senior Fellow of the Peterson Institute for International Economics: "there's a little progress on this issue in the Dodd bill." and "But, really, that issue, what we do with these massive banks that, if they fail, they bring down the system, is not being addressed enough, either in this bill or in the Frank bill, and definitely front and center of the administration's original proposal."

It's very disappointing that during this relatively narrow window of opportunity to pass real regulatory reform, Chris Dodd has produced a 1,100 page bill that does not solve the biggest problem of all. From Joe Nocera, NY Times financial expert: "So, you know, if you have one Goldman Sachs, maybe you should have five Goldman Sachs, or five Morgan Stanleys that are smaller in size. These are issues that this Congress just does not want to tackle."

Our senators should listen to experts and create a regulatory agency that has the power to prevent banks from becoming "too big to fail", and prevent a repeat of what has happened. How can someone craft an 1,100 page bill and not include this?

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