Chairman of the Senate Banking Committee Christopher Dodd has introduced sweeping legislation to regulate the financial services industry. The bill, at 1,336 pages, would dramatically change the regulatory landscape for one of our most important industries and spread to other non-financial industries.
The bill would create vast new regulatory powers for the Treasury Department. According to an interview with the Wall Street Journal, Senator Bob Corker says that “there’s no question that Treasury is pushing left,” indicating the Treasury’s Department’s desire for more regulatory power.
In fact, Treasury Secretary Timothy Geithner is expected to deliver a speech today that calls for Congress to pass a bill with “real reforms.”
Indication of interest in these regulations may be gauged by the fact that some 400 amendments to the bill have been offered.
As with any regulation, especially a law designed to regulate a large and multi-faceted industry, unintended consequences are certain to arise. The Main Street Alliance, a coalition of leading U.S. manufacturers and business groups warned that many businesses that would not usually be considered financial institutions could fall under this regulation.
The Dodd bill extends systemic risk regulation to “nonbank financial companies,” defined as any business substantially engaged in “financial activities.” Because the term “financial activities” is so broad and includes things like lending money and investing a company’s own assets, the bill could authorize the new systemic risk regulator to regulate manufacturers, retailers and other non-financial services businesses.
Also: “We are concerned the new draft bill is so broad that larger manufacturers could be subjected to regulation by the Federal Reserve,” says Dorothy Coleman of the National Association of Manufacturers, a member of the Alliance.
Dodd’s proposed regulation is a response to the financial crisis of 2008. Whether new regulation is needed in response to that crisis is one question. But as the Main Street Alliance wrote in a letter to the Senate Banking Committee: “We do not believe that it is the intent of Congress to impose a new regulatory regime on companies that had nothing to do with the financial crisis of 2008.”
It should be noted that Dodd is not running for re-election this year. He faced declining poll numbers in his home state of Connecticut.
Nutz…! If they have their way the only place to invest money is in crapy government securities to help pay for wasteful government spending.
In my opinion Christopher Dodd is one of the god-fathers of corruption within the Senate and is largely responsible for the economic situation that America is in now.