Dodd’s Bank Bill: Worse Than ObamaCare. It’s the Nationalization, Stupid!

May 11, 2010 09:34

To put it bluntly but absolutely accurately, this bill sets up a mechanism for the Treasury Secretary, the Federal Reserve, and the Federal Deposit Insurance Corporation to nationalize virtually any business they deem to be a threat to American “financial stability.”

by John Berlau at Big

There are many bad things contained in Chris Dodd’s Restoring American Financial Stability Act,” the financial regulatory “reform” bill that after filibustering for three days — with the assistance of Nebraska Democrat Ben Nelson — Republicans agreed to let come to the floor for amendment and debate.


Among its horrors are a massive new consumer agency with the power to track virtually every financial transaction to share with other big agencies like the IRS, onerous new restrictions on angel investors and venture capital that greatly delay funding promising startup firms, proxy access provisions that would federalize state incorporation laws and empower unions and other progressive shareholders to wage director campaigns at the company and other shareholders’ expense, and no attempted reform of the government-sponsored enterprises Fannie Mae and Freddie Mac at the center of the financial mess.

But the most destructive portions of the bill — the one that would in my judgment go beyond even Obamacare in making the American free enterprise system unrecognizable — has been little discussed even by critics of this bill. To put it bluntly but absolutely accurately, this bill sets up a mechanism for the Treasury Secretary, the Federal Reserve, and the Federal Deposit Insurance Corporation to nationalize virtually any business they deem to be a threat to American “financial stability.”

I include myself among these critics not focusing on this issue and I apologize for not informing readers sooner, but I wanted to be sure the bill would do what I suspected it would do. Many of the bill provisions are interconnected, and what can seem like a mild measure by itself becomes lethal when combined with another sections. As Financial Times columnist Gillian Tett recently wrote: “Buried in [the bill’s] pages are numerous clauses and sub-clauses, many of which have been largely ignored until now (partly because they strike most non-financiers as pretty dull). Yet, the fine print could turn out to be crucial in the coming years.”

And after reading and rereading the “fine print” of this 1336-page piece of legislation (which will grow by hundreds more pages when amendments are added), it is clear that the bill’s “orderly liquidation authority” would facilitate outright government seizure of a wide variety of firms with very limited judicial review.

The first clue of what the bill would do in this regard comes from one of the bill’s architects. House Financial Services Committee Chairman Barney Frank, author of the similar financial bill that passed the House in December, has freely used the term “death panels” to describe the new powers the bills give the government over firms. In response to charges of “death panels“ in the health care bill, Frank responded that the panels were in the wrong bill. “Yes, we have death panels, but they got the death panels in the wrong bill,” Frank said on the House floor. “The death panels are in this bill.”

Defending against charges that the bills’ new mechanism to wind down firm will lead to taxpayer bailouts, Frankwrote in the Huffington Post that under this authority, “Shareholders are wiped out, unsecured creditors are out of luck, management and every employee that is not required to shut down the company is fired.” What Frank and other of the bills’ architects don’t say — not even in liberal venues like the Huffington Post — is that the bills also give the government these same powers to take over firms not seeking any kind of government aid.


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