July 1st, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today condemned the House of Representatives for approving Dodd-Frank conference legislation “that will institutionalize government bailouts and takeovers for all time.”
“House members have voted to not address the real causes of the financial crisis that government was responsible for,” Wilson said. “Instead, they have created a new, radical regime to seize disfavored financial firms, bail out favored ones, monitor finances, and levy unlimited taxes on the American people, all without any vote in Congress or the opportunity to object in court,” Wilson said.
Wilson warned that “bailouts and takeovers under the so-called ‘orderly liquidation fund’ will never end, and the American people have 237 members of the House to thank.”
The final vote in House was 237 to 192.
The “orderly liquidation fund” would be financed by “risk-based” assessments levied by the Federal Deposit Insurance Corporation (FDIC) on institutions totaling $50 billion or more in assets, proceeds from securities issued by the FDIC of seized firms, interest and other earnings from investments owned by the fund, and “repayments to the Corporation by covered financial companies.”
According to a Congressional Budget Office (CBO) analysis of a similar bank tax proposal by the Obama Administration, “the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors, but the precise incidence among those groups is uncertain.”
Wilson noted that the bill still includes a controversial Office of Financial Research that empowers the office, according to the legislation, to “collect, validate, and maintain all data necessary” to maintain financial stability “obtained from member agencies, commercial data providers, publicly available data sources, and financial entities.”
“Members voted to create the Office of Financial Research, which will have the ability to know about every transaction in the country it deems it necessary for the sake of financial stability. That’s the power to monitor everyone’s finances, if it wants,” Wilson said.
According to the bill, the OFR would “require the submission of periodic and other reports from any financial company for the purpose of assessing the extent to which a financial activity or financial market in which the financial company participates, or the financial company itself, poses a threat to the financial stability of the United States.”
The legislation also outlines that the Director of the OFR would be given subpoena power to require “the production of the data requested … upon a written finding by the Director that such data is required” to maintain financial stability.
Wilson also condemned the Dodd-Frank conference bill for what he said was “its inherent failure to address the root, government causes of the crisis. For example, the bill does not audit the Federal Reserve, whose easy money, low interest lending policies fueled the housing bubble,” citing research by Stanford economic professor John Taylor stating that “the Fed’s target for the federal-funds interest rate was well below what the Taylor rule would call for in 2002-2005. By this measure the interest rate was too low for too long, reducing borrowing costs and accelerating the housing boom.”
Wilson also cited research by former chief credit officer of Fannie Mae, Ed Pinto, demonstrating that Fannie Mae and Freddie Mac weakened mortgage underwriting standards and mislabeled high-risk mortgage-backed securities, defrauding investors; that the Federal Housing Administration (FHA) lowered down payments on mortgages; and that the Department of Housing and Urban Development’s (HUD) Community Reinvestment Act regulations and “affordable housing goals” reduced lending standards and forced banks to give loans to lower-income Americans that could not be repaid. “None of these root causes are addressed, either,” Wilson said.
“The Dodd-Frank bill even prohibits the liquidation of Fannie Mae and Freddie Mac under the ‘orderly liquidation’ authority, a provision that was only added in conference,” Wilson noted.
Wilson concluded, “Members who voted for the Dodd-Frank financial takeover have signed off on an unlimited bailout-takeover authority, unconstrained bank taxes, financial privacy violations, and have ignored the root, government causes of the financial crisis. They must be held accountable.”
Attachments:
“’Down a Rabbit Hole:’ The Threat Posed by the Dodd Bill to the Private Sector,” Updated June 28th, 2010, Americans for Limited Government.
“Big Brother is Watching You: The Threat Posed by the Dodd Bill to Privacy,” Updated June 28th, 2010.
Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.
Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.