It’s the wrong bill at the wrong time for the wrong reason.
We’re talking about the freshly minted Dodd-Frank law that President Obama and congressional Democrats claim will prevent another meltdown of the nation’s financial system. Let’s hope they’re right; come to think of it, let’s hope we never find out if they’re right.
And while we’re hoping, let’s hope Dodd-Frank doesn’t cause the thing it’s supposed to prevent, by smothering the financial system in regulation and red tape.
Only three Republican senators — including Olympia Snowe and Susan Collins of Maine — voted for the bill. We don’t question the sincerity of Snowe and Collins in backing a bill they believe will benefit their constituents, but our senators’ support of it has not persuaded us that this is a good bill.
The bill’s name alone — Dodd-Frank — is enough to make us nervous. Connecticut Sen. Chris Dodd and Massachusetts Rep. Barney Frank, both Democrats, were among the many Washington politicians and bureaucrats who were asleep at the switch while some of the nation’s biggest banks and other financial institutions were doing their best to self-destruct two years ago.
Frank has no shortage of critics, in fact, who believe that in his role as chairman of the House Financial Services Committee, he was a prime architect of the subprime mortgage crisis that helped fuel the near collapse of financial markets in this country and around the world.
Frank, his critics say, contributed to the crisis by insisting that the Federal Home Loan Mortgage Corp. — Freddie Mac — dole out ever-increasing numbers of high-risk loans to low-income home-buyers.
For Frank and Dodd, who is chairman of the Senate’s banking committee, this bill was as much an exercise in atoning for their oversight sins as it was a noble if misguided undertaking to protect the public from the evils of the banking business.
For Obama, it’s a transparent attempt to give the voters what they want — retribution against the financial services industry — and to give Democrats political cover in the November elections.
That said, will this new financial regulation law make things better for the American people? In some ways, maybe. It creates an independent watchdog agency to protect consumers from abuses in the issuance of credit. It gives the government the ability to monitor and control some of the biggest banks’ most reckless moneymaking schemes.
On the whole, though, the risks posed by overregulation far outweigh the potential rewards of sterner oversight.
Economic growth depends on the free flow of capital, entrepreneurship and aggressive, creative investment by businesses, large and small. Too much meddling by government in the marketplace stifles investment and depresses growth.
With the economy still struggling to shed the shackles of recession, this is the worst possible time for the government to pass a law that will tamper with investor confidence and discourage growth.
We agree with Senate Minority Leader Mitch McConnell, the Kentucky Republican who spearheaded opposition to the Dodd-Frank bill. McConnell said the law creates a “vast new unaccountable bureaucracy” that will “deter lending and freeze up credit.”
“Once again,” he said, “the administration and its Democrat allies in Congress have taken a crisis and have used it rather than solved it.”Economic growth depends on the free flow of capital, entrepreneurship and aggressive, creative investment by businesses, large and small. Too much meddling by government in the marketplace stifles investment and depresses growth. With the economy still struggling to shed the shackles of recession, this is the worst possible time for the government to pass a law that will tamper with investor confidence and discourage growth.
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