Financial Regulation

Obama's Financial Overhaul Is Certainly Uncertain

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Well, I suppose we'll have to study the issue.

Transparency, certainty, and an end to taxpayer-funded bailouts. As President Obama signed the Dodd-Frank financial regulation bill into law this morning, that's what he promised would result from the Democrats' massive overhaul of financial sector rules. That might be nice if it were true. But it's tough to argue that rules the administration barely understands will add transparency to the system, and even tougher to argue that the law grants certainty—for everyone "from bankers to farmers to consumers," as Obama claimed—when so many of its key decisions are left to regulators to figure out sometime later. If anything, the law's game of regulatory kick-the-can creates vastly more regulatory uncertainty; witness the shutdown of various bond markets as ratings agencies urge financial services companies not to use their products until they have a better idea of how to calculate the new liabilities the law gives them. As for Obama's precious farmers—no politician can resist their earthy charms—it's not clear how or whether they'll be affected by the new rules. But that's exactly the point: Right now, many individuals and industries are deeply uncertain about how the new rules will play out. That makes them worried, and those worries affect their behavior.

As for those nasty taxpayer-funded bailouts, Obama stood strong: "There will be no more taxpayer-funded bailouts. Period," he said, explaining that "there will be new rules to make sure that no firm is somehow protected because it is too big too fail." This is true except for the small fact that the law actually reinforces too-big-to-fail—and grants the big banks that are expected to fall into that category lower borrowing costs that end up being financed by taxpayers.

So despite promises of stability and financial protection, Obama and the bill's authors have given little more than a vague promise to study up on the problems—the law responds to nearly all the toughest issues by calling for new studies—and come up with a some to-be-determined way to fix things eventually. Maybe. Perhaps. At some undetermined point in the future. But still: Certainty! Transparency! It's all so clear now, isn't it?

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  1. The standing ovation for Dodd-Frank was a nice touch. They really think we are blithering fuckin idiots.

    1. Yeah. I didn’t throw up in my mouth a little, but I wanted to.

    2. What’s this we shit?

  2. This is true except for the small fact that the law actually reinforces too-big-to-fail?and grants the big banks that are expected to fall into that category lower borrowing costs that end up being financed by taxpayers.

    I believe it also gives explicit bail-out authority directly to the Federal Reserve, allowing it to bail out banks without Congressional approval. I believe this is in addition to the special treatment given to big banks at the discount window.

    1. You beat me to it, R C. Anyway, …

      “There will be no more taxpayer-funded bailouts.”

      “The bailouts will be funded by the Fed.”

      Continuing to study Obamaese …

    2. As long as the word “taxpayer” doesn’t appear in future bailout legislation, it won’t be “taxpayer funded.” Easy!

    3. Exactly.

      “There will be no more taxpayer-funded bailouts. Period,” that you know about. All future bailouts will be funded by the Federal Reserve, which has no oversight and is certainly not related to taxpayers at all.

  3. motherfuckers

    Really, its all I can think of. This is the equivelent to the ‘Smott-Hawley’ act. Our financial system will have to go on a slowdown until the fat fucks at Treasury and SEC and Fed all get the regs together. Important to not – ALL of Washington goes on vacation in August, so expect the preliminary regs around January.

    1. That’s what I was going to say.

  4. And doncha love the sweet, creamy irony of the fact that this bill, passed in response to the economic crisis caused when the credit markets locked up, immediately caused the credit markets to lock up?

  5. One of Dodd & Frank’s biggest campaign contributors is Bank of America so you can rest assured the new law doesn’t favor big banks.

    1. And Goldman-Sachs was one of the biggest contributors to Obama himself so you can be sure it doesn’t favor large financial institutions.

  6. “…he promised…”, “…Obama claimed…”, “…Obama stood strong:…”, “…promises of stability…”, “…a vague promise…”

    Hasn’t anyone learned to put a camera behind him to make sure his fingers are crossed?

  7. I have this vague memory that Dodd and Frank had some role in causing the economic crisis ? oh well…….

  8. At this point they’re just passing shit to pass it, most likely pressured by the big banks and their lobbyists. Dodd wants his name on something before he retires, and this is it.

  9. Transparency, certainty, and an end to taxpayer-funded bailouts.

    Did he check with Dodd before he said that?

  10. Just curious, how is this “Obama’s” finacial reform?

    Last I checked, it’s a bunch of Congress people who wrote the damned bill.

    1. I checked my little Cato pocket copy of the Constitution and you’re right! Congress makes the bills. The president just signs them! It seems as though the Constitution requires a separation of powers. They call them “branches” or something. Do the people know this?

    2. He just gave a speech praising the legislation, which he signed.

    3. Obama owns this. It’s his. Just like Obamacare. It’s his name on this crap.

      It looks almost like you think this is a bad idea. If you didn’t I’m sure you’d have no problem attaching the zero’s nams to it, right?

      1. attaching his NAME, even.

    4. The president always takes credit when a law is passed. Unless it turns out to be a massive fuckup, in which case it’s Congress’ fault (well, the Congressmen from that other party).

      1. in which case it’s Congress’ Bush’s fault

        And let’s not forget that Bush massively deregulated the financial sector, such as…well, it’s his fault!

      2. It is the minority party’s fault. They could have used parlimentary tricks to stop the bill.

        Pussies!

      3. or ‘the previous administration’

  11. As for those nasty taxpayer-funded bailouts, Obama stood strong: “There will be no more taxpayer-funded bailouts. Period,” he said[.]

    Among other hundreds of lies he has told the public.

  12. Suderman’s post can be condensed into one sentence:

    Obama is a big fat liar.

    1. He’s not fat, you liar.

      1. But his pants are on fire.

  13. There will be no more taxpayer-funded bailouts. Period. I can make a firm pledge, under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.

  14. As for those nasty taxpayer-funded bailouts, Obama stood strong: “There will be no more taxpayer-funded bailouts. Period,” he said

    [Activates the Oparisator app] So, bailouts will be even more numerous and larger than ever before. Gotcha.

    1. Oparisator=Oparsinator.

      Preview is your friend.

  15. The shorter version of my magnum opus about what caused the financial crash. Now with pictures.

    1. That’s awfully long. Is there a Cliffs Notes version?

      1. Check out the longer version (link at the bottom of the shorter one).

        1. I don’t think you understand how TL;DR works.

  16. Financial reform is going to reform the financial sector like the Death Star reformed Alderaan.

  17. Is there a Cliffs Notes version?

    THEY did it!

  18. This just in. Federal Reserve Chairman Ben Bernanke told Congress Wednesday “All the shit we’ve done in the last 2 year didn’t work (but it would’ve without those damned Europeans) but we’re ready and willing to do some more of it any time.”

  19. Interesting little bit on CNBC this morning; farmers surprised(!) to discover this Bill will adversely affect their ability to hedge commodities prices.

    1. Those darn speculators!

    2. Re: P Brooks,

      Interesting little bit on CNBC this morning; farmers surprised(!) to discover this Bill will adversely affect their ability to hedge commodities prices.

      Don’t worry – with the coming AGW-fighting bill, they won’t have to: they will not be able to buy diesel to keep their farms open, anyway.

      Ah, but what a boost for Big Agribusiness, who will be able to ABSORB the costs of commodity prices – isn’t Obama-socialism grand?

  20. Can anyone explain why any regulation besides, “Thou shalt not steal” is needed?

  21. The indeterminacy of the regulatory future has been a sea-anchor on the markets since 2008.

    People need to realize that the markets dont really care that much how much regulation is involved: they want to know WHAT IT IS, and WHAT THE IMPACT WILL BE. That’s all. Then they can quantify it and continue with business. Without clarity, you get uncertainty, and people holding their powder dry. This sort of behavior by government for over 2 years now has been a major drag on investment. No one knows what the rules are or are going to be, and no one wants to play a game where someone changes the rules midway. People need to realize that this kind of indistinctness is probably the worst of all situations. If anything, clear and concise legislation is needed with finance: it encourages people to read the ‘rules’ and follow them. Without guidance, people are lost in a void, and capital will not be employed in that kind of environment. This is nothing but another kick in the nuts to the economy, which is the last thing this country needs.

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