The Agitator | Radley Balko | Quote of the DayAmateur hour. At least those halfwits with the flavored cigarette law had a goddamn theory about how things were supposed to work after they passed it. This is nothing but "Something must be done; this is something; therefor we must do this." Grandstanding stuffed shirt bullshit.
“It’s a great moment. I’m proud to have been here. No one will know until this is actually in place how it works. But we believe we’ve done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done.”That’s a “teary” Sen. Chris Dodd (D-Conn.), on the financial overhaul bill assembled by leaders in both houses this week. So Dodd, the chair of the committee with jurisdiction over the bill, has no idea how the bill work. Which also means he has no idea if it will work. Which also means he has no idea if the bill will do more harm than good. Nonetheless, he’s certain it was needed, and is proud to have helped make it happen.
This sentence from the Washington Post description of the Dodd-Frank bill tells me everything I need to know about it:
The legislation puts a lot of faith in the watchful eye of regulators to prevent another financial crisis.That really means "This time we promise to hire the right people to be turning knobs and pulling switches, and this time we promise they'll be paying attention and make the right decisions instead of the wrong ones." If you want a system — any system — to be robust to failure you can't rely on having just the right people in just the right place at just the right time.
We already had regulators with "watchful eyes" who were supposed to prevent financial crises. Where were they? Why didn't the suits pay attention to the warnings from their own geeks? Why did they bow to pressure from politicians? Why didn't they stop the ship from hitting the last iceberg? Unless there are some answers to those questions this bill boils down to "This time will be different, we promise!"
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PS This is not as useful as you may think it is, indeed it is probably counter-productive if your goal is systemic stability.
In reaching this deal, negotiators adopted a provision that would ban certain forms of proprietary trading and forbid firms from betting against securities they sell to clients.To understand why, think about what a sports bookie does when making his book.
Overall I think Congress has mistaken stability for rigidity.
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PPS All this bullshit in the WaPo article about congressmen working until 5am to hammer this out — spare me. That's a decent night's work where I come from. Twenty hours of work? Chump change.
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PPPS See Tyler Cowen for a breakdown of provisions. Hard to read due to formatting, but worth it. He concludes with:
The bottom line: the good parts of the bill aren't nearly as good as they should be, and the bad parts became much better with time. The biggest omissions are simple and tougher restrictions on leverage and reform of the mortgage agencies. Overall consider this a victory for the status quo and you should realize that the underlying problems have not been solved.(Decapitalized for you convenience.)