In truth, much like the backroom deal-laden health care law President Obama and the Democratic Congress forced upon a nation that didn’t want it, President Obama’s Wall Street bailout bill contains a host of special-interest carve-outs and loopholes designed to favor Democrats’ most powerful campaign contributors, bureaucrats, and political allies. Here are some noteworthy examples:
1. The Fannie Mae/Freddie Mac Loophole. The White House-backed bill fails to reform Fannie Mae and Freddie Mac, the government mortgage companies that sparked the financial meltdown after evading even the most modest reforms thanks to their friends in the Democratic Party. For years, Republicans consistently raised red flags about Fannie and Freddie’s financial condition and proposed responsible reforms only to be thwarted by Democrats with deep political ties to the worst offenders.
2. The Soros Loophole for Hedge Funds. The White House-backed bill conveniently exempts hedge funds from the Volcker Rule that establishes investment restrictions on depository institutions, the tax imposed on banks and the massive new regulatory structure being imposed on other financial firms. It should come as no surprise that - as The Hill reports - "hedge funds donate big to Democrats." Chief among those contributors is big Obama supporter George Soros, one of the top 25 richest hedge fund managers.
3. The Bailout Loopholes. The White House-backed bill would - with or without the $50 billion bailout slush fund - empower the federal government to provide Wall Street with permanent bailouts, courtesy of American taxpayers. Under the Dodd bill, the nation’s largest financial firms - including Goldman Sachs, President Obama’s top Wall Street ally - would be eligible for special treatment at the highest levels of government, including resolution authorities and resources unavailable to smaller financial firms. As Rep. Brad Sherman (D-CA) recently said, "The Dodd bill has unlimited executive bailout authority. … The bill contains permanent, unlimited bailout authority."
4. The Job-Killer Loophole. The White House-backed bill undermines small businesses, costing jobs and undermining our economy at a time when we can least afford it. As the NFIB states in an April 26 letter: "Many small business retailers and merchants - such as medical professionals, hardware, electronics, and jewelry stores - struggling through the current economic climate would be subject to these new regulations. … Addressing problems in the financial services sector makes sense, but such regulations should not overreach to include small business or leave small business owners paying for the excess of companies deemed too big to fail." With unemployment hovering near 10 percent, the last thing the economy needs now is new layers of bureaucracy and red tape that restrict financial products and discourage economic growth.
5. The Trial Lawyers’ Loophole. The White House-backed bill is riddled with loopholes that will soon become a favorite tool of class action and consumer protection trial lawyers. Is it any wonder why trial lawyers give so much money to Democrats?
6. The Bureaucrats’ Loophole. The White House-backed bill lets the Securities & Exchange Commission (SEC) off the hook. From Forbes: "The Dodd bill fails to address the glaring weaknesses at the Securities and Exchange Commission that played a central role in creating the financial panic of 2007-2009. Nor does the bill address the SEC’s failure to properly oversee the Financial Accounting Standards Board, whose rulings allowed trillions of dollars of securitized loans to be removed from bank balance sheets and capital requirements and whose mark-to-market accounting rules senselessly wiped out hundreds of billions of dollars of bank capital and panicked the financial markets." (”Obama’s Financial Reform Weak and Ineffective,” Bill Isaac, Forbes, April 22, 2010)
7. The Foreign Bank Loophole. The White House-backed bill exempts foreign-based firms from the Volcker Rule. As a result, as Nomi Prins notes in this column, "European banks could thus expand their private equity and hedge-fund game on our soil, thereby spreading globalized risk."
8. The "Credit Rating Agencies" Loophole. The White House-backed bill doesn’t fix the very serious problem with credit rating agencies. From liberal columnist Paul Krugman: "No, the e-mail messages you should be focusing on are the ones from employees at the credit rating agencies, which bestowed AAA ratings on hundreds of billions of dollars’ worth of dubious assets, nearly all of which have since turned out to be toxic waste. And no, that’s not hyperbole: of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent - 93 percent! - have now been downgraded to junk status. What those e-mails reveal is a deeply corrupt system. And it’s a system that financial reform, as currently proposed, wouldn’t fix." ("Berating the Raters," Paul Krugman, New York Times, April 26, 2010)
9. The Backroom Deal Loopholes. The White House-backed bill literally carves out certain groups from being subject to regulation by the new Consumer Financial Protection Bureau. Who is carved out? Trial lawyers, entities (allegedly) regulated by the SEC, manufactured home retailers, and a mish-mash of more. There appear to be no principles that guide who is covered and who is not.
10. The GM/Chrysler TARP Loophole. The White House has backed a proposal to impose a TARP tax on large financial firms that received TARP money, but it specifically excludes GM and Chrysler - both of which received taxpayer money from TARP. Even Treasury Secretary Geithner admitted yesterday that “It’s not going to seem fair to everyone, and there’s no perfectly fair approach,” according to Congressional Quarterly.
Tags: Washington, D.C., White House, top 10, US House, US Congress, Dodd Bill, financial regulation, Wall Street, bailout, special-interest, loopholes To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
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