Morning Bell: Dodd Bill is Just the Beginning of ‘Too Big to Fail’

Conn Carroll /

Majority Leader Harry Reid (D-NV) failed to end debate on Sen. Chris Dodd’s (D-CT) financial regulation bill yesterday when two Democrats broke ranks to vote with conservatives. The Dodd bill is already a big government monstrosity, expanding powers for existing Washington regulators as well as creating and empowering new ones. But frightened by the defeat of Sen. Arlen Specter (D-PA) and the near defeat of Sen. Blanche Lincoln (D-AR), Sens. Maria Cantwell (D-WA) and Russ Feingold (D-WI) issued statements following their “no” voted demanding that the bill further increase the power of Washington bureaucrats.

Specifically, Cantwell wants to criminalize violations of the bill’s extremely complex new derivatives provisions, and Feingold is demanding the resurrection of Depression Era prohibitions on banking diversification. Not only has our federal government already criminalized the violation of far too many  arcane regulations, but the derivatives provisions already in the bill are sure to drive investment, jobs and revenues out of our domestic markets and into foreign ones. And Feingold’s claims that restoration of the Glass-Steagall would prevent “too big to fail” bear no relation to reality. None of the major entities at the core of the 2008 financial crisis would have been affected by Glass-Steagall Act because none of them are commercial banks. Bear Stearns, Merrill Lynch, Lehman Brothers, AIG, Fannie Mae and Freddie Mac all dug their financial crisis graves by making terrible decisions that would have been perfectly legal under a Glass-Steagall regime.

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