Network News

X My Profile
View More Activity

Dodd: 'It's not size; we're preoccupied with size.'

PH2010031904990.jpg

Chris Dodd is chairman of the Senate Banking Committee and principal author of the financial regulation bill that the Senate will consider next week. We met at his Senate office Wednesday to speak about the makings of the financial crisis, his approach to financial regulation and whether we need to break up the banks. An edited transcript follows.

Ezra Klein: Tell me your narrative of how the financial crisis happened. What happened to us in 2008? What brought the financial sector down?

Chris Dodd: I'd been chairman of the Banking Committee for 38 months. I actually remember a day in the fall of 2007, before Paul Sarbanes retired, that we were in some chaotic mess in the committee and he put his right arm around my shoulder and swept his left hand in front of him and he said, "Just think, in a few months all of this is yours." I had no idea how prescient that was.

So I take over as chairman in January of 2007. The first week in February, we had our first hearing on the crisis of 2007, and it was on the mortgage crisis. We had witnesses who laid out exactly what was going to happen; in fact, they underestimated what would happen, and they were ridiculed for estimating what they did! And all that spring we went back and forth had meetings, we had a big gathering at the Banking Committee room with all the major players on mortgages. We had an awful time getting Hank Paulson to recognize anything. And Ben Bernanke, too. They'd come to meetings and they'd kind of have this blank stare, all during that spring, through that summer, into the fall.

In fact, Dick Shelby, that night of September 18th as he was sitting next to me in Nancy Pelosi's office, kept on whispering to me, "If they'd only listened to you." But on the mortgage thing, we just couldn't get any attention. That was the primary cause of what was otherwise a manageable set of issues. It would have been a difficult time, but it didn't have to explode into what it became in the fall of 2008. People don't know this, but we came within a hair of the United States government declaring that Monday a bank holiday for the first time since the Great Depression.

EK: Huh. I haven't heard that before.

CD: I went on a flight Sunday night to Brussels to meet with central bankers over there to talk about these issues, and I got on the plane at 6 or 7 at Dulles and didn't know until I landed in Brussels the following morning that in fact J.P. Morgan had stepped up. Then in the summer, you had the Fannie/Freddie stuff, Hank Paulson saying, "I'm not going to use the bazooka, but I've got it in my pocket here," so in '08, everyone became more engaged. But there should have been a deeper appreciation that this wasn't just a Bear Stearns issue. Then of course comes September 18th, the night where Hank Paulson and Bernanke says, "Unless you act within a matter of days, the entire financial system will melt down."

I got charged that night by Harry Reid that Barney [Frank] and I would pull together what turned out to be the Emergency Economic Stabilization bill. And, of course, you may recall that we got an e-mail, three pages from Hank Paulson. He wanted $700 billion, no court can intervene, no regulator can intervene, and of course over the weekend the country went nuts when they heard about this. By Sunday night, we had an 82-page bill drafted in the Banking Committee, and frankly there were concerns I had that the House was going to go along with Paulson, just give him the money, get the issue off the table. So we wrote a bill, and those next two weeks were a wild time, with John McCain suspending his campaign and everything else. But the bill passed 75 to 24; Ted Kennedy was the one missing vote that night.

EK: And to ask about the other dimension to that question: What actually happened to cause this? Not just how did the government respond, but literally what created the problem? What, when we talk about the financial regulation and Wall Street, are we attempting to fix?

CD: The first thing that happened was that you had a lot of unregulated entities…

EK: Shadow banks.

CD: Yeah. You need securitization, but the failure to have underwriting standards, the fact that they could go out and just lure people in, the no-doc loans, the fabrication of information. When you go to the Web sites of these brokers they said that the first thing you as a broker should do is convince the borrowers you're their financial adviser. I put that up in my first hearing. And of course they were anything but your financial adviser. , But then the bank was selling the loans off in eight to 10 weeks, so they were out of the game, and of course the rating agencies don't conduct due diligence. So it was just a series of dominoes that created this huge bubble and there was nothing underneath it. That's why so much of what this bill is designed to do is make sure that there's no one again in the financial services sector that can escape regulation.

EK: There are a lot of pieces to the bill, there's derivatives, there's resolution authority, and on and on and on. So is that the theory of the bill? Get the shadow banks into the regulatory structure? Is there a theory of the bill? Or is it just a lot of different things we should do?

CD: There are three main things. One is to fill in the regulatory gaps that clearly were the source of the problems that created this crisis. Secondly, to provide the kind of tools that didn't exist. In the world in which you and I live today, we have no radar system, really, that allows us to be able to look over the horizon, not just domestically but internationally to see what's happening. So what happened in England with Rock, what's the name of the bank…

EK: Northern Rock.

CD: Northern Rock, for instance. Or Greece. How do you get the ability to identify potentially systemic problems? So that's the second piece of this bill. The third piece is, in a way, is to say, "Look, be careful now." We're a global leader in financial services, so I want to make sure as we fill in the gaps, provide the tools and the radar for the future problems, you don't strangle the system. Some of these words have become pejoratives, and they're not, they're needed. Derivatives are needed for stability in the marketplace. So we want to make sure that in our ability to do this, we're not doing it in a way that causes us to lose our leadership in the world, one. So those are my three goals. It's not easy to manage all of them.

EK: You're saying we need to balance the need to help regulators more easily detect and respond to a crisis with the need to preserve Wall Street's basic functioning. But do you worry, and does anything in this bill address, the question of regulatory failure? You have Alan Greenspan coming before the FCIC saying, "We just didn't know. We didn't see it. We need this to be automatic because in the future we won't see it again." You have Robert Rubin, who comes in and he says, "I was on Citibank's board of director's but I just didn't know, I didn't realize this could happen." There was a fair amount of information out there already, there were people, as you say, before your committee who predicted it. But there were incentives, in the boom times, to ignore it. How do you handle that?

CD: Because they too narrowly defined the word "safety" and "soundness." Things are going up, money's being made, that's it! What could be not safe and sound about that? But "safety" and "soundness" ought not to be so narrowly defined as "people are making money." What are capital standards? Where are the leverage points in all this? How much liquidity is there? What's happening to consumers out there? The consumer protection idea is not just nice, to have something over here for consumers, it was the missing element in a lot of this in terms of what was actually going on in that marketplace.

In addition, I don't buy these, "Oh, we didn't see it," they didn't want to see it, things were going too well, they were too fat, too much money was being made, and smart people, when you look at 40, 50 to 1 leverage, who in their right mind would have thought that made any sense at all? And regulators were being told that every bank was going to go to London. The first thing I got when I came in, "Boy, it's a new chair of the committee, you better get with it, everybody's going to go to London." I haven't heard that comment lately. But that was the move in January of '07 even.

EK: But nothing in your bill says you can't have 40 to 1 or 50 to 1 leverage.

CD: It says regulators…

EK: It says regulators can decide that you can't.

CD: Barney put the number in there, in his bill.

EK: At 15 to 1, right?

CD: Yeah. And I don't disagree with it; obviously it makes sense to me, or 12 makes sense. I'm not opposed to it. But what's the competency of Congress? When we write this up, I'll guarantee you, before the ink is dry, some 22-year-old is going to come out and figure six different ways to get around what I've just written. Not that that can't happen with the regulators, but those are the people we ask to do this, these are supposed to be the talented, bright people who spend all day focusing on this and learning the subject. Maybe I'm wrong about it, but I honestly feel that I've got a better chance of getting better results in terms of what we're trying to achieve through that approach than the approach of, "Forget the regulators, we're just going to write it ourselves."

EK: It seems you're caught between a rock and a hard place here. On the one hand, you can't look at what happened and say, "The regulators will not fail us." The regulators will tell you themselves that they'll fail you. Then, on the other hand, Congress does not feel that it has the competency to write these rules, there's the fear that what you could write here will be gamed in five years. Which is why I think some of your colleagues, like Senator Kaufman and Brown, along with some in the expert community, have argued that as long as we're going at this "too big to fail" problem, it's just going to be unsolvable. They're too powerful, it's too complex, we don't have the expertise, and it's why we should do the simplest thing and just break up the large banks beyond some basic level of assets.

CD: I don't agree with Paul Krugman a whole hell of a lot of stuff, but I agree with him on this one. It's not size; we're preoccupied with size. And I'm not suggesting that any size is okay, but it's really risk, it's these other elements in here. A relatively innocuous product line in a relatively small company can pose huge, systemic risk. That said, in our bill, we provide the authority to break up companies. That is clearly in the bill, the authorization to do that under certain circumstances. But I'm not sure that we ought to become so preoccupied with it. And again, I've looked at the 13 Bankers book, and so forth, that approach, and I hear this, by the way, not just from them, but from CEOs of major corporations. This is not some left/right question. But I just don't think that it makes a lot of sense. I don't think it'll prevail.

What we've done here says that if you're going to become a certain size, that's fine. But you're going to have to meet different capital standards, you're going to have different criteria that are going to protect us against the possibility you can fail. And just in case you have any doubts about this, if you do fail, all your management's fired, all your shareholders lose, all your creditors lose, you can't go back into the business for years to come. So yeah, you can get bigger, but there are going to be a lot of things to insulate us and our economy from the kind of hazards you could pose by your size.

EK: A lot of what you say, when you say it's not size but interconnectedness, seems to be a critique located in the derivatives market. That's where the interconnectedness comes, that's where the complexity is. What are your bright lines on derivatives?

CD: Let the market work. I've had people tell me that had the market known about the financial products division of AIG, that that wouldn't have lasted 30 seconds. But they didn't. It was the shadow economy. So a lot of sunlight, a lot of transparency, ought to be the presumption as you're looking at this. I believe if people can see what's going on, then the markets will react to this stuff. Now I accept the notion that there are certain derivatives where there just isn't a volume in what you're dealing with here that it probably doesn't need to be on an exchange. But I like the idea of a presumption of an exchange, because the exchange is where I get the sunshine on this. And if markets are reacting as they ought to be, they'll have their own way of pricing these products or rejecting them because of their shortcomings or their weaknesses.

EK: The final question here, and I don't want this to sound like cheap populism because it isn't, but a lot of the current level profits in Wall Street come from this complexity, this over the counter, bilateral trading. There's just a lot more money in trading products that only you understand. We saw before the crisis that Wall Street profits were a bit below 40 percent of all domestic profits,and now they're back up there again. Should we worry about that systemically? Is a country where 40 percent of our profits are in the financial sector, is that a healthy economy and is it even possible to regulate a sector where there is such enormous reward for risk?

CD: I don't like the equation. I don't believe you ought to be giving up manufacturing and the kind of job creations that go on with producing things. Putting aside the debate on what should happen to the financial sector, I worry about a country that is innovative enough to produce plasma televisions, but not smart enough to figure out how to make them here. The other piece here is accountability afterwards. This becomes the responsibility of Congress, in every administration you've got to be overseeing what the regulators do. You've got to be bringing them up. The fact is, we put the Vice President of the Fed and tell him or her, "You're responsible for systemic risk. That's your job." So that person comes up for the vice chairmanship of the Federal Reserve Board, your job is, you're getting called up because you're the point person on the Fed board now for systemic risk. There's someone I can grab by the lapels in the future and say, "What are you doing? What's going on out there? What's happening out there?"

Now if Congress doesn't do it, and future chairs of the committee doesn't do it, I don't know how to regulate that. We had, basically, eight or 10 or 12 years here, members of Congress saying basically, "You guys are doing great." So the notion of getting back to an economy where, again, institutions are performing back to more of their core functions is something that I think is important. I don't restore Glass-Steagall in this bill. But we come pretty close to trying to at least push or cajole or lure institutions back to more core functions. Banks being banks. We've got to move this thing back, and I think we achieve a lot of that through this bill. That answers your question, we need to get back to the time before 40 percent of our economic success was just coming up with fancy instruments that allowed people to make a profit off of them without producing much.

Photo credit: Andrew Harrer/Bloomberg News.

By Ezra Klein  |  April 22, 2010; 9:27 AM ET
Categories:  Financial Regulation , Interviews  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: What happens next for Lincoln's derivatives proposal?
Next: The American Farm Bureau is afraid of interns

Comments

"I worry about a country that is innovative enough to produce plasma televisions, but not smart enough to figure out how to make them here."

Actually, they're smart enough to not make them here. Relatively high corporate taxes vs. relatively low tariffs, importation makes more sense than manufacturer (and, of course, lower wages in manufacturing countries play a role, as well).

Too bad you didn't touch on the potential of the VAT tax. One of the likely unintended consequences of a VAT is that it would move more manufacturing and even assembly out of America, leaving us with almost nothing but a service economy. So the share of US business profits that the financial sector represents would go up--way up. Although overall GDP would likely go down.

"I don't restore Glass-Steagall in this bill"

Of, course not. Instead of re-instituting a core set of time-tested regulations that we know worked, we want to do new stuff that may work or may have unintended (and negative) consequences. Cuz we're smarter than 200 years of American history.

Sigh.

Posted by: Kevin_Willis | April 22, 2010 9:46 AM | Report abuse

Great interview, once a gain, Ezra. CD's answers, however, give me great cause for concern. He seems to be throwing highfalutin jargon that don't seem to make much sense. It looks like that CD hopes that the administration knows what it is doing and the bill will turn out OK. Very depressing sign.

Posted by: ns3k | April 22, 2010 10:09 AM | Report abuse

Interesting - I guess I would have assumed a VAT would apply to imported goods, but would be applied at retail, like a regular sales tax. Is that not true?

Posted by: jduptonma | April 22, 2010 10:09 AM | Report abuse

"I'm not suggesting that any size is okay"

many a girl has thought this.

Posted by: jfcarro | April 22, 2010 10:09 AM | Report abuse

Simply restoring Glass-Steagall might not be enough. There was other legislation prior to the repeal of G-S (e.g. the Monetary Control Act of 1980) that stripped other protections from the system. Repealing G-S was just the last step in Milton Friedman's acolytes' campaign to unleash the financial sector.

(And with the Bush administration as absentee dogcatcher, that newly unleashed pit bull proceeded to savage the economy.)

While I want at least the protection that prior Keynsian-based regulations provided, I can't fault Dodd for writing new regulations from scratch to try and take into account things that we didn't know when the original regulations were enacted.

Posted by: Gallenod | April 22, 2010 10:11 AM | Report abuse

Forgot one thing: I want a 15:1 leverage ratio in the final bill, but that should be a threshold for automatic public review, not necessarily specific action. That way, while you leave determining specific actions to the regulators, you don't give them any discretion about whether or not to drag that comapany's into the light. Given the stigma attached to public review of leverage risk, I'd bet most companies would not want their leverage ratios to rise above 15:1 and be publicly identified for being over-leveraged.

Posted by: Gallenod | April 22, 2010 10:19 AM | Report abuse

How significant are the ideas of a lame duck like Chris Dodd? One thing you can count on a Dodd for is blowing his own horn.

Posted by: M1Rifleman1940 | April 22, 2010 10:23 AM | Report abuse

Chris Dodd is a poster child for term limits. This corrupt "friend of Angelo" along with Barney Frank are responsible for the current financial meltdown and mortgage crisis for their complete lack of congressional oversight. Their complicity in our financial meltdown will not be forgotten.

Putting Dodd in charge of "financial reform" is like putting the fox in charge of the chicken coop. It is pure hypocrisy. Dodd and Frank reek of the foul odor of corruption in Congress.

Posted by: alance | April 22, 2010 10:24 AM | Report abuse

I've read the 10:19 AM comment from Gallenod above twice: "That way, while you leave determining specific actions to the regulators, you don't give them any discretion about whether or not to drag that company into the light."

That sounds practical -- so I'm left to wonder if such practices (and hard upper limits to regulatory discretion) have been considered. The presence of such limits on regulatory discretion, even if ultimately ineffective, might go a long way in restoring public confidence in the regulators, in congress, and in the system of regulation itself.

Posted by: rmgregory | April 22, 2010 10:30 AM | Report abuse

@alance: "Putting Dodd in charge of 'financial reform' is like putting the fox in charge of the chicken coop."

That can be good or bad. Who knows better how he broke into the chicken coop (and ate all the chickens) than the fox?

@Gallenod: "While I want at least the protection that prior Keynsian-based regulations provided, I can't fault Dodd for writing new regulations from scratch to try and take into account things that we didn't know when the original regulations were enacted."

I don't blame him either, though it may not be necessary. The reality is, what we had in place before seemed to work pretty well over a long period of time. Extra stuff (which can have unintended consequences and costs not anticipated, and that perhaps cannot be anticipated until the new systems are in place) should, frankly, come after--perhaps well after--the effects of returning to what we knew worked before are observed and measured.

Also, frankly, they don't sound serious about re-instituting Glass-Steagall. They should brink it back, in it's full pre-1980s glory, and call it Glass-Steagall. Exactly the same.

Posted by: Kevin_Willis | April 22, 2010 10:47 AM | Report abuse

You should have made the headline: "Dodd: Size doesn't (necessarily) matter"

Posted by: blah1 | April 22, 2010 10:47 AM | Report abuse

Dodd was elected to the U.S. Senate in the 1980, and was subsequently reelected in 1986, 1992, 1998, and 2004. He is the first senator from Connecticut to serve five consecutive terms.
=============

Yet he never saw it coming?

How inept is that for a legislator who is suppose to be among the handful of men and women running our country?

And I bet he feels he deserves to be re-elected

Posted by: asmith1 | April 22, 2010 10:59 AM | Report abuse

Look the shadow banking - unregulated and part of regulated banks extended trading arms on leveraged derivatives - is what brought the meltdown. And if you can't separate them from traditional banks, there is no way you an oversee 24/7 trading houses.

Me thinks, from Aug'07, that first Investment Banks must be completely autonomus entities and Hedge Funds need to be suspended until we can find ways and means to regulate them....

EU is investigating hedge funds with a view to outlawing their functions - until further notice.

Posted by: hariknaidu | April 22, 2010 11:03 AM | Report abuse

Size does matter -- when you're too big to fail, you can also write your own rules.

When Citicorp bought Travelers Group in 1998, they simply said screw you to the regulators. Congress obliged by repealing Glass-Steagall.

Posted by: leoklein | April 22, 2010 11:05 AM | Report abuse

Thanks for an interesting interview - it's a shame more in-depth interviews aren't being conducted like this!

Posted by: madjoy | April 22, 2010 11:14 AM | Report abuse

Where is the Tea Party rage machine now? They got themselves into a gigantic lather last week over President Obama's tax cuts. Are they at all interested in reform of financial institutions? Or, just because President Obama is pushing for it, they are once again, fueled by Obama Derangement Syndrome, totally opposed? I thought they wanted to "take their country back"? Where is their outrage now? Why are they and their enablers on Fox and Right Wing Radio so silent on this issue? Don't they care about Big Banks? The Wall Street-K Street axis? Hello? Are the Baggers out there? Anyone?

Posted by: osullivanc1 | April 22, 2010 11:17 AM | Report abuse

@osullivanc1: "Where is the Tea Party rage machine now? Where is their outrage now? Why are they and their enablers on Fox and Right Wing Radio so silent on this issue?"

They are suspicious of Democrats and don't trust liberals so the minute they (Democrats) come out in favor of mom, baseball, hot dogs and apple pie, they assume there is some sort of trick and prepare to oppose. "For Democrats, apple pie is a code pastry for socialism!"

Posted by: Kevin_Willis | April 22, 2010 11:25 AM | Report abuse

Phil and Wendy Gramm are having a melancholy moment as the perfidy they did on behalf of the financial sector and the Republican Party is mitigated.

Dodd is correct to say that while size—as in too big too fail— is a problem it is risk —as in leveraged 40 to 1— that is the device threatening the world's economy with Mutually Assured Destruction (MAD) as nuclear weapons were described during the cold war.

In 2000, Texan Republican Senator Phil Gramm slipped a thick, 262-page measure (the Commodity Futures Modernization Act: more on that below) into a $384 billion spending bill.

The act, said Gramm, (his wife Wendy was head of the Commodity Futures Trading Commission from 1988 to 1993 after a lobbying campaign from Enron, the CFTC exempted it from regulation in trading of energy derivatives. Subsequently, Wendy Gramm resigned from the CFTC and took a seat on the Enron Board of Directors and served on its Audit Committee), would prevent the SEC — especially the Commodity Futures Trading Commission — from getting into the business of regulating financial products called "swaps."

Swaps, of course, were at the heart of the subprime debacle.

"Tens of trillions of dollars of transactions were done in the dark," reports University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing... {subsequently} there was more betting [with credit default swaps] on the riskiest subprime mortgages than there were actual mortgages."

And lest we forget, Phil Gramm, in the role of Republican Presidential Candidate and "Not A Maverick" John McCain's chief financial advisor said, ""Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action."

Of course Phil's idea of the "American Dream" is the nightmare we've lived through for two years and have yet to fully wake from with 20 percent unemployed—thank you Phil and Wendy and Republican teabaggers everywhere as you follow Sister Sarah at the wheel of the Tea Party express bus right off the cliff in November.


Posted by: teoc2 | April 22, 2010 11:33 AM | Report abuse

Typical politician.

Says all the right words, but then it turns out that one of the banks is giving him free loans.

Posted by: postfan1 | April 22, 2010 11:49 AM | Report abuse

"It's not size; we're preoccupied with size."

Isn't this written on all of our tourism brochures? "Welcome to the United States of America; we're preoccupied with size." Why does Chris Dodd hate America?

Seriously, very useful interview here. Good questions and great follow-ups!

Posted by: slag | April 22, 2010 11:54 AM | Report abuse

Kevin, that's right. It's easy to figure out why plasma TVs aren't produced here: we pay our workers more than in China, we provide government services to make the lives of workers better and safer, and we restrict the dangerous ways in which companies can do business. I happen to think those all good things, but if we allow business to then move their manufacturing somewhere that doesn't have those protections with no financial negatives to the company, then of course that's what happens.

Posted by: MosBen | April 22, 2010 12:02 PM | Report abuse

Ezra Klein is a national treasure. A journalist who takes the time (and has the capability) to understand the substantive issues, not just the political gamesmanship, unlike 99% of his colleagues at the WaPo.

Posted by: Dan4 | April 22, 2010 12:14 PM | Report abuse

Aside from the content of this conversation, what struck me most was the lack of coherence in Senator Dodd's answers.

Posted by: DonCarder | April 22, 2010 12:17 PM | Report abuse

@MosBen: "and we restrict the dangerous ways in which companies can do business"

Unless you're talking about the financial sector! Ba-dum-dum!

The point being, "but not smart enough to figure out how to make them here" seems an odd thing to say. I would think Dodd knows why they aren't made here, and why they won't be. While we can impose financial penalties on companies that manufacturer overseas (and I think we should have higher tariffs generally, including on items manufactured overseas by American companies, but that's another discussion), it wouldn't take long for the increase in cost to be reflected at the retail level, which would hurt the American consumer.

Still, if we're going to raise taxes, going back to the tried-and-true--the estimable tariff--is a route I could approve of.

Posted by: Kevin_Willis | April 22, 2010 12:24 PM | Report abuse

Dodd needs to go quietly and is the reason, along with several other Congressional members, that we are in this mess. I wouldn't believe anything he says or does.

Posted by: 45upnorth | April 22, 2010 12:25 PM | Report abuse

Most interesting. Dodd's answers, despite what some comments say, were clear, concise and even understandable to those who have taken a bit of time to learn about the financial system.

As I read it I was thinking how very fortunate we have been to have someone of Chris Dodd's caliber heading up this bill. He has gotten an awfully unfair rap by right-wingers, but I believe he has served us admirably and has all the right motives. So I say, thank God America had Chris Dodd at the head of this committee. Given the political climate, I think he did all that he could to protect us from future derailments. No one is perfect, but he has my thanks for doing a great job.

He is absolutely right about the years of NOTHING being done by a Republican Congress to monitor and oversee, which is their JOB. If you ever watched the few committee hearings held during the Bush administration's first six years you can recall the Republicans giving the financial industry a totally free ride, just pats on the head. They made it hard for Democrats to get anything done as well. But those were the old days. Now, with President Obama and a Democratic Congress the country can finally move again in the right direction, under laws, and in accord with the Constitution.

Some of the comments here by right-wingers show a lot of ignorance even as they assume they know history. Would that they actually avail themselves of a few facts before they take the time to write something.

Posted by: baileywick | April 22, 2010 1:43 PM | Report abuse

MosBen,

don't forget that healthcare in China costs a lot less than here. Didn't I used to hear that you could add $1500 onto the price of a car?

Posted by: visionbrkr | April 22, 2010 2:08 PM | Report abuse

Great interview. Dodd comes off at least to me as being spot on in what needs fixing. I like his commentary on trusting regulators more than legislatures in handling these matters, especially regarding leverage ratios. Its probably easier to circumvent legislation written by politicians, where regulators are probably more current and informed.

Posted by: hcwarden | April 22, 2010 3:21 PM | Report abuse

Yes, yes. By all means. Let's listen to CHRIS DODD. The CROOKED SON, of a CROOKED FATHER. A guy who picks up the phone and gets a sweet deal on a Mortgage from a company who does Business before his Committee. A guy who's WIFE makes SIX FIGURES, sitting on BOARDS of Companies, that do business before his Committee. A guy who said he had NO KNOWLEDGE of BONUSES for AIG< and then later ADMITTED that HE was the one who WROTE IT in to the bill. A guy who gets CONDOS and IRISH COTTAGES from CROOKS that he lobbied for PARDONS for.
By all means, let's listen to CHRIS DODD.
LIKE FATHER, LIKE SON. The CROOKED P.O.S. doesn't fall far from the tree, after all.
SCUMBAG.

Posted by: GoomyGommy | April 22, 2010 4:18 PM | Report abuse

There's basically two things that need to be done:

1) Separate banks from the derivatives trading and investment banking businesses. Entities for which the taxpayer is the ultimate guarantor should not be allowed to engage in these types of risky activities.

2) Significantly increase margin requirements for firms that take positions in these kids of highly-leveraged investments. If firms want to make these kids of risky bets, make sure that they have enough of their own money on deposit to where if they go bad, we don't need ti run to Washington to keep the financial system solvent.

Posted by: danram | April 22, 2010 4:35 PM | Report abuse

DODD.

Architect of the housing collapse.

Disgraced corrupt SCUM.

DODD, you will be jailed your traitor for your crimes you criminal scum.

Posted by: mickrussom | April 22, 2010 5:52 PM | Report abuse

If you support Obama and his Regime, you support a Statist authoritarian who is an empty suit who speaks in platitudes who is beholden to the oligarchical collectivists and banking cabals. You are against freedom, liberty and our constitutional republic and the notion that all of our rights are inborn and are given by our creator. Some autocrat in Washington does not grant rights – the constitution simply enumerates them for added protection. The constitution also limits the Powers of the Federal Government yet an expansionist authoritarian view is used in modern times contrary to what Madison had intended. If you support Obama you support the biggest threat to our free will in our history, and when the last bastion of freedom in the USA falls, there is nowhere else to go.

Posted by: mickrussom | April 22, 2010 5:54 PM | Report abuse

In response to the first question, Dodd says:

"So I take over as chairman in January of 2007. The first week in February, we had our first hearing on the crisis of 2007, and it was on the mortgage crisis. We had witnesses who laid out exactly what was going to happen; in fact, they underestimated what would happen, and they were ridiculed for estimating what they did!"

Here's the list of Senate Finance Committee meetings for 2007: http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.List&Month=0&Year=2007

He is apparently talking about the 02/07/2007 hearings on "Preserving the American Dream: Predatory Lending Practices and Home Foreclosures."

The conclusion of the president of the National Association of Mortgage Brokers is a real hoot:

"We recommend Congress to put forth measures and explore those avenues that outreach to borrowers and provide meaningful education to them in a timely fashion rather than just at the time of application or at the closing table. Possessing a fundamental understanding of the mortgage lending marketplace and the loan product types available will empower borrowers to comparison shop, ask meaningful questions and make financial decisions that advance their personal life objectives. Again, NAMB strongly believes that because financial education is the key to choosing the right loan product and protecting oneself against fraud, the consumer education process should begin at a young age. To this end, NAMB supports any effort that calls for federal funding to support consumer financial literacy efforts and outreach programs during the school years."

Posted by: MisterSavannah | April 22, 2010 6:16 PM | Report abuse

Ezra, where in the Dodd legislation does it plainly state that should a "too big to fail" financial institution get into trouble no taxpayer dollars will be forthcoming to bail them out? Zero dollars.

Posted by: Kelly14 | April 22, 2010 6:52 PM | Report abuse

There is something inherently sketchy about allowing someone like Dodd who has major ties to the financial services industry to be in charge of some of the seminal financial regulation of our era. Include charges of allegation that surround Dodd, and it seems unlikely that the results of the legislation will benefit society in general. Instead, the end result will be industry capture as usual.

Posted by: MonticelloRob | April 23, 2010 12:43 AM | Report abuse

Dodd's "the problem" along with his partner in crime, Barney Frank.

Posted by: plaasjaapie | April 23, 2010 7:41 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company