Yesterday morning on CNBC, I heard Wisconsin Republican Representative Paul Ryan remark that Barney Frank had rammed his bloated, misguided bill on financial sector regulatory reform through the House.
It's another one of those huge bills with so many hidden details and bad ideas that few Congressmen probably even know what they passed. It's sure to have loads of unintended consequences.
For example, certain large financial institutions will qualify for treatment as 'too big to fail,' and be subject to a federal government commission to determine if it is in danger of insolvency, and if it should be saved.
Funny, but I always thought that was up to creditors. Or, if it's a bank, perhaps the FDIC.
But some shadowy federal government panel?
What happened to bankruptcy as the normal process for those companies which get into too much financial trouble?
Ryan opined that this bill will abet "crony capitalism." That is, large, bloated financial service firms will make use of the revolving door between industry and government to insulate themselves from failure and buy government accommodation. The smaller banks, Ryan noted, will be hurt because they have to play by the rules without such connections.
You can bet that nowhere in this legislation did Frank allow his own culpability in driving Fannie Mae and Freddie Mac to securitize more questionable mortgage loans to be addressed and, for the future, prevented.
Instead, we will have a bewildering new set of rules for credit provision. Some will put onerous new demands on companies that simply want, as a by-product of their main business, to allow customers to buy using credit.
As Ryan indicated, by using health care as the big distraction, the Congressional Democrats are stealthily redesigning yet another sector of the US economy.
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