Yesterday the Senate invoked cloture with a 60-39 final vote, and passed the Dodd-Frank bill, which was sold to the public as a set of common sense reforms designed prevent a repeat of the 2008 US financial market collapse, but which morphed into a 2,400 page monstrosity that gives tremendous authority to new and existing Federal agencies, enabling the Federal government to greatly expand its regulation of the financial operations of most major businesses.
The major flaws in the bill have been discussed here previously. The Obama Administration seems to have an affinity for creating new regulatory and administrative agencies with appointed (as opposed to nominated and confirmed) directors, as well as loading bills with numerous provisions that have little or nothing to do with the stated purpose of the bill. Dodd-Frank is certainly no exception.
The Washington Times quotes Alabama Republican Senator Richard Shelby:
“During our negotiations on the consumer bureaucracy, my Democrat friends were not focused on the mortgage market. Their sights were set on the rest of the economy,” he said. “The new bureaucracy is an enormous reach across virtually every segment of our economy, and a massive expansion of government influence in our daily financial lives.”
The Times continues:
The bill would create more than 20 “offices of minority and women inclusion” at the Treasury, Federal Reserve and other government agencies, to ensure they employ more women and minorities and grant more federal contracts to more women- and minority-owned businesses.
… Sen. Bob Corker, a Tennessee Republican who also sought to help write a bipartisan Senate bill more narrowly focused on the problems that led to the crisis, said he fears that an activist director of the consumer agency could use agency power to direct loans to favored constituencies, regardless of whether the loans are sound or pose risks to the banking system.
“This may sound a little far-fetched, but you can have the wrong person in this position – there’s no board, there’s really no check and balance – that you can imagine could use this organization to try to create social justice in the financial system,” he said.
Like the corporate boardroom provisions, many of the activities within the reach of the new consumer agency had “absolutely nothing – zero – to do with the financial crisis,” Mr. Corker said. “But this has become a Christmas tree for those kinds of things, because people realize it’s something that’s going to pass.”
The Dodd-Frank bill burdens any business — not just investment, banking, or lending institutions — with a myriad of new regulations if it engages in activities that are “financial in nature,” a broadly defined term that includes everything from owning or leasing real estate, to investing cash reserves, to purchasing derivatives contracts for market commodities it consumes (like fuel), to receiving and holding downpayments from customers, to providing retirement options for employees.
As with the health overhaul bill, many of the specific provisions in the Dodd-Frank bill remain unwritten, and will have to be worked out by the administrators and directors of the new and existing Federal agencies tasked with implementing the bill. Of course this will add yet another layer of uncertainty on top of the mountainous aggregation of unknown taxes, fees, and regulations that businesses are already facing, thanks to the Obama Administration’s lust for regulatory power.
One thing we can be sure of, though, is that the Law of Unintended Consequences will win out in the end. We can only pray that those consequences do not fatally cripple our economy.