Thursday, July 15, 2010

2300 Pages & 533 New Regulations And Fannie Mae/Freddie Mac Go Untouched

The new financial regulatory bill of Senator Dodd and Representative Barney Frank is sure to be a big hit. Not with the American people or the financial system; but, with the lawyers. This 2300 page monstrosity contains 533 new laws and regulations for the banking and financial industries to digest and navigate through. The entire system will have to hire and contract more and more lawyers to keep themselves from cracking any legal eggs as they tip-toe through life under the new bill. In effect, the Dodd/Frank bill will do to the banking/financial system what Congress has done to the tax codes: Both confusing and contradictory laws.

I mention the tax codes because tax laws in this country are so complex that if you have any little natty problem on your tax return and you call the IRS for clarification, no one person will actually be able to help you. In fact, if you talk to 10 people at the IRS about the same issue, you will more than likely get 10 different answers.

I find it interesting that we even have the Dodd/Frank bill to begin with. Following the housing collapse and the recession, Congress created a new commission, the Financial Crisis Inquiry Commission in May of 2009, that was supposed to determine the "what's" that created the housing/economic collapse in the first place. Yet, now, we have a bunch of new laws that -- evidently psychic in their creation -- presume to know what the conclusions of that commission will be when it finally issues its report in December.

Even more amazing is that fact that Dodd and Frank, who many believe caused the housing meltdown by their actions on their respective banking committees, were allowed to author the new regulations. More incredible, is the fact that Freddie Mac and Fannie Mae are being left untouched by congressional Democrats. With few exceptions, most financial experts and economists believe that Freddie and Fannie were the key to the housing crisis and subprime loan debacle. After all, those two government sponsored enterprises collateralize and process about 60% of home mortgages in America, and the vast majority of subprime loans were allowed to exist because of them.

Quite frankly, the Dodd and Frank bill is a hit list of things the Democrats don't like about the banking and financial industry. You might say it is their personal vendetta against the "business" of finance in this country. Nothing in this bill will actually prevent another meltdown. Instead, most of the 533 new laws and the requirement for additional legal consul will only make banking and stock transactions more expensive; and, it is you and I that will pick up the tab for that. Further, the regulations are designed to tighten all forms of lending. In doing so, expect the expansion of small business and corporations to be crippled. Lastly, Freddie Mac and Fannie Mae, now choked with massive deficit spending, are left alone to continue to push unqualified buyers into homes they can't afford. You can clearly hear the footsteps of another economic collapse approaching.

For all of this, we can thank the consummate team of Chris "Dodge the Blame" Dodd, and Barney "Not So Frank" Frank!

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