Sunday, August 19, 2012

Dodd-Frank Failure

Like most of what Congress does; Dodd-Frank (also know as financial "reform") is a complete and total disaster.  To call it a failure would be too kind.  To call it a failure would imply that it merely does not fix the issue it was intended to remedy.  Not only does this financial deform (certainly not "reform", as reform implies progress) fail to even mention Fannie Mae and Freddie Mac in the lengthy legislation but it also makes the issue of "too big to fail" much worse.  According to a Fitch Ratings study:  Six largest US banks hold about 98% of notional value of derivatives markets.  "Too big to fail" has now become yet another ticking time bomb, just as Nassim Taleb once wrote that "Fannie Mae and Freddie Mac were ticking time bombs", and (unfortunately for us) he was proven correct.  Once again, Congress creates a problem, blames the problem on free markets (economic freedom), divides us by demonizing certain "classes" of people and attempts to divide us against one another's industry (banks, insurers, hedge funds, private equity funds, venture capital funds, coal, oil, natural gas, and of course small businesses), wastes tax dollars that could have created growth in the private sector, and makes the problem considerably worse.

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