On the recordApril 27, 2010
As we watch the Senate move on legislation yet again toward a cloture vote on Senator Dodd's legislation, I think it is worth noting some of the concerns that many of us have and that many economists have with the Dodd-Frank approach on the legislation. I begin with focusing on a past occurrence, the rescue of investment bank Bear Stearns in the spring of 2008. The Federal Government has committed trillions of taxpayer dollars to institutions like Fannie Mae, Freddie Mac, AIG, Citigroup, and Bank of America out of fear that the demise of any of these too-big-to-fail institutions would trigger a systemic crisis and collapse of the global financial system. For my own part, I'd make the observation that I thought--I voted against those bailouts with the presumption that if we move to enhance bankruptcy, it would be preferable to setting up a system which would bring the moral hazard and the eventual evolution into a system where the Federal Government was guaranteeing institutions that were too big to fail. But that is currently the concern I have about this legislation, even though the public has rejected this approach to financial regulation, the bailouts that we have seen, and abhor bailouts of financial institutions. If you have a town hall meeting, I guarantee you, you will sense the rejection of the Dodd-Frank approach.
