Interesting article, but I think it misses the point. When Congress passed Dodd-Frank and Obama signed it, I was vocal about how that law was a P.o.S. It failed to address the root causes of the financial crisis. Also, for the symptoms that it did try to address, it failed to provide any real teeth for enforcement. So do I care that Romney would tinker with or dilute further the Dodd-Frank Act? Not really. The whole act was crap to begin with and was more window-dressing than anything else.
At the end of the day, any worthwhile legislation that wants to address the root causes of the financial crisis will do the following things:
1) Bring back Glass-Steagal, separating Commercial from Investment banking.
2) All derivative contracts need to be regulated on an exchange with similar rules to commodities and other securities. All dark pools should be closed.
3) CDS contracts should only be allowed to be drawn on assets that the contracting party owns or has a demonstrable financial interest in. In other words, Goldman Sachs can't buy or create a CDS insurance security on and MBS security that they do not own. This would prevent them creating an MBS that was designed to blow up, selling to some schmuck, and then buying or creating a CDS product to profit when it does blow up.
4) Explicitly state AGAIN that re-selling or re-assignment of mortgage loans to a third party are not valid until title has verifiable been signed over. If not, then the mortgage debt is not enforceable through foreclosure and the debtor will be held harmless and may retain the property and use of it until title verification processes are adhered to.
5) If the FDIC is guaranteeing deposits at a commercial bank, then demand $1 of fair market value collateral for every loan a commercial bank lends. Bring back Mark to Market rules for collateral and debt held on the books and ensure the SEC enforces compliance in all public reports.
6) If a commercial bank becomes insolvent, then the FDIC will make good the depositor accounts to $250K, but the bank itself should expect no government bailout EVER. They will need to avail themselves of bankruptcy protection or find investors to provide a capital infusion. All commercial banks should abide by these rules or have their charters revoked.
7) Enforcement mechanisms for the rules above should be similar to SOX rules, which include criminal prosecution and jail time for executives, even if they didn't know it was going on in their bank. Ignorance should not be a defense, since they have a position that mandates fiduciary responsibility.
That's just for starters. Dodd-Frank does none of the above, and therefore, it didn't address one damned root cause of the financial crisis. |
