It was 80 years ago today...

[ProSense]

52. What utter

"An example: FDR was less than perfect because of the un-Constitutional internment of Japanese Americans during the war.

Thus, FDR is a flawed model for Obama to follow, making it good Democratic policy to support his Wall Street-first economic policy."

...nonsense.

The Wall Street reform law would have a significant impact if implementation is sped up.
http://www.democraticunderground.com/10022441546

Report: Wall Street’s Opposition to Dodd-Frank Reforms Echoes Its Resistance to New Deal Financial Safeguards

Bedrock Consumer Protections Once Were Flogged as ‘Exceedingly Dangerous,’ ‘Monstrous Systems’ That Would ‘Cripple’ the Economy

WASHINGTON, D.C. – As the nation approaches the first anniversary of the Dodd-Frank financial reform law, opponents are claiming that the new measure is extraordinarily damaging, especially to Main Street. But industry’s alarmist rhetoric bears striking resemblance to the last time it faced sweeping new safeguards: during the New Deal reforms. The parallels between the language used both then and now are detailed in a report released today by Public Citizen and the Cry Wolf Project.

In the decades since the Great Depression, Americans acknowledged the necessity of having safeguards in place to prevent another crash of the financial markets, including the creation of the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC), and laws requiring public companies to accurately disclose their financial affairs. Although these are now seen as bedrock protections when they were first introduced, Wall Street cried foul, the new report, “Industry Repeats Itself: The Financial Reform Fight,” found.

“The business community’s wildly inaccurate forecasts about the New Deal reforms devalue the credibility of the ominous predictions they are making today,” said Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report. “If history comes close to repeating itself, industry is going to look very silly for its hand-wringing over Dodd-Frank when people look back.”


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In fact, the Dodd-Frank Wall Street Reform and Consumer Protection Act is designed to prevent another Wall Street crash, which really made it tough on everyone by causing massive job loss and severely hurting corner butchers and bakers, as well as retirees, families with mortgages and others. The Dodd-Frank law increases transparency (particularly in derivatives markets); creates a new Consumer Financial Protection Bureau to ensure that consumers receive straightforward information about financial products and to police abusive practices; improves corporate governance; increases capital requirements for banks; deters particularly large financial institutions from providing incentives for employees to take undue risks; and gives the government the ability to take failed investment institutions into receivership, similar to the FDIC’s authority regarding commercial banks. Much of it has yet to be implemented.

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http://www.commondreams.org/newswire/2011/07/12-0

Does Dodd-Frank really end ‘too big to fail’?

Posted by Mike Konczal

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Dodd-Frank tries to deal with these issues by creating the rules for a crisis in advance. It requires stricter regulations on capital and activities for the largest and riskiest financial firms, to make them less likely to fail in a crisis. Dodd-Frank also grants the FDIC a special new power called resolution authority. This allows the government to run a bridge company to keep essential operations running at a failed firm that needs to be liquidated, with losses put on those who deserve them, rather than putting taxpayers at risk.

So what do critics have to say? The first objection is that all of this is unnecessary – there’s no such thing as systemic risk. Bank runs usually don’t happen, but when they do they are necessary, and they don’t threaten the surrounding financial system. This laissez-faire approach doesn’t carry much weight among scholars.

The second criticism — he one Hensarling is making — is that resolution authority is a permanent, unfair bailout. Some argue that the FDIC will use their powers to bailout creditors instead of imposing losses on them. Others worry that the FDIC’s ability to borrow money and provide bridge money is an unfair practice that puts taxpayers at risk of losses. The underlying concern is that stakeholders in the financial firm won’t care if they go through resolution authority, and as such, resolution authority makes them a safer bet and acts as a kind of permanent bailout promise to the markets.

However, the structure of Dodd-Frank’s resolution authority is explicitly designed to avoid bailouts. Numerous regulators must approve the activation of this process, and they have to argue that either the bankruptcy code or “a private sector alternative to prevent the default” aren’t available or appropriate instead...if a firm goes into resolution the FDIC has to wipe out shareholders and hit creditors in a way designed to mimic bankruptcy. It is blocked from buying equity in the firm, like in TARP or AIG, and can’t act for “the purpose of preserving the covered financial company.” It also has to fire management, board members, and has the option to claw back previous compensation. It’s difficult to imagine a firm wanting to go through this process. If any taxpayer money is put on the line, it has to be recouped from the financial sector as a whole; this is appropriate, because the government is acting to preserve the financial sector as a whole.

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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/02/does-dodd-frank-really-end-too-big-to-fail/