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 Richmans' Trade and Taxes Blog

Why Financial Reform Now? Why Not a Bill That Creates Jobs?
Raymond Richman, 4/23/2010

The President’s motives in offering a financial reform bill to regulate Wall Street and the banks has all the appearances of a Mein Kampf strategy for national socialism. Like burning down the Reichstag and blaming it on your political foes. Pretend that the banks and investment houses caused this recession when everyone in Washington knows it was the housing bubble that created the financial crisis, a bubble one of whose authors was Barney Frank who reported out the House version of this bill.  Taking advantage of the negative public reaction to bailouts, which actually turned out to be pretty inexpensive, the reform bill speaks of avoiding the need for bailouts in the future. Why? TARP’s toxic assets were rendered harmless at very low cost. Why not plan on repeating it during the next recession? Say, sixty years from now.

You won’t need any new taxes, no phony fund to slice up companies too big to fail. Why break them up? Make them a loan and get back your principal with interest! That is what happened during this recession.  The loans, negatively referred to as bailouts, stabilized the banking system at amazingly low cost to the taxpayers. In the future it will be at a very high cost represented by the taxes to create a fund that will have as little reality as the social security fund. The taxes will all be used as the social security fund is used, to finance government borrowing.

Likewise, bankruptcy is an inexpensive way to restore a company to health and protect the creditors. Instead Obama stole GM’s assets from the creditors. The unions which were largely responsible for GM’s bankruptcy were rewarded with GM’s ownership, not punished.  It would have been healthier for the economy if GM had gone through bankruptcy and the creditors reorganized the company. Personally, I have little doubt that his principal objective in this so-called reform proposal, as it was in the healthcare bill and in taking over GM, is to socialize the economy. He will use the next crisis, if we have a double dip as appears likely, to nationalize the banks and Wall Street and the credit card companies.

One finds it hard to understand why he is proposing a solution to the next crisis before he has offered any realistic solution to the present crisis and before he has done anything to reduce unemployment which officially is about 10 percent of the labor force but in reality is twice that. It has been seventy years since we last had a depression. So what is the hurry to prevent the next depression. Why now?

Ah, now we are asking a really pertinent question. Is it because the Dems will never again have a majority as large as they have now in the Senate and House? If the Democratic left wants to make progress in socializing the economy, conditions will never be more favorable.

The House has passed legislation (H.R. 4173) that will create a massive new government agency, the Consumer Financial Protection Agency (CFPA), to regulate consumer financial products. The Senate Banking Committee also has passed legislation to create a similar new regulator, the Bureau of Consumer Financial Protection (BFCP), with the “authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses (lenders, servicers, mortgage brokers, and foreclosure scam operators) and large non-bank financial companies, such as large payday lenders, debt collectors, and consumer reporting agencies. Banks with assets of $10 billion or less will be examined by the appropriate bank regulators with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.” This is too nonsensical to be believed and too dangerous. This kind of authority was known in Italy as fascism; in Germany, as national socialism.

It creates “a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.” In Italy, this was known as fascism; in Germany, as national socialism.

It is supposed to promote “transparency and accountability” for derivatives and other investment vehicles by  eliminating “loopholes that allow risky and abusive practices to go on unnoticed and unregulated .” The government could not even detect the housing bubble. Apparently they never listened to the radio or watched television commercials.

The agency will supervise banks to create “clarity and accountability” and support community banks. What do the existing agencies do? Isn’t this redundant?

Provide shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation. ACORN, here is another opportunity to blackmail businesses!

The bill is supposed to protect Americans from unfair, deceptive and abusive financial products and practices and to ensure people get the clear information they need on loans and other financial products from credit card companies, mortgage brokers, banks and others. What if they cannot absorb such information because of language problems, mental deficiencies, or laziness?

It states that this economic crisis was driven by an across-the-board failure to protect consumers. The result has been unfair and deceptive practices being allowed to spread unchallenged, nearly bringing down the entire financial system. This is utter nonsense. Congress caused the housing bubble and has not yet repealed the Community Reinvestment Act which, as we shown elsewhere, started the housing bubble.  

Tell your Congressman and Senators and the President that you do not need this bill which will only add to the deficit. It would lead to reduced living standards for workers. Tell them to address the real causes of this depression, i.e., foolish mortgages and the huge trade deficits. Ask them, how many of the unemployed will be given sustainable jobs by this bill? Tell them to pass a bill that says jobs, jobs, jobs; drill, drill, drill; that brings back the jobs Congress encouraged to go overseas. Tell them to get trade into balance. Tell them to cut wasteful government expenditures. They could begin by abolishing the Department of Housing and Urban Development and the Department of Education. Both have been failures over their long history. Cut back on environmental subsidies and other foolish giveaways. It is time for Congress and the President to get real. This financial reform bill is a total waste of time and money.

Comment by Jacob, 6/8/2010:

Among the very best solutions to conserve cash, or just before applying for an individual loan should be to develop an individual budget. By developing a personalized spending budget you happen to be a lot more most likely to make sure you don't borrow a lot more than you can repay when apply for short term installment loans. Also producing a spending budget is most likely among the best methods to make sure you do not over spend your cash and make certain your bills are usually paid. One advantage is that you're less likely  to purchase a lot more than you must or a lot more expensive than you need to when you have already set up a budget.