Skip to comments.The case for repealing Dodd-Frank
Posted on 12/04/2013 2:51:24 PM PST by RicocheT
"Marking-to-market worked effectively as long as there was a market for the assets in question, but it was destructive when the market collapsed in 2007. With buyers pulling away, there were only distress-level prices for private mortgage-backed securities."
"Accordingly, financial firms were compelled to write down significant portions of their private mortgage-backed securities assets and take losses that substantially reduced their capital positions and created worrisome declines in earnings. When Lehman Brothers, a major investment bank, declared bankruptcy, a full-scale panic ensued in which financial institutions started to hoard cash. They wouldnt lend to one another, even overnight, for fear that they would not have immediate cash available when panicky investors or depositors came for it. This radical withdrawal of liquidity from the market was the financial crisis."
"Thus, thecrisis was not caused by insufficient regulation, let alone by an inherently unstable financial system. It was caused by government housing policies that forced the dominant factors in the trillion dollar housing marketFannie Mae and Freddie Macto reduce their underwriting standards. These lax standards then spread to the wider market, creating an enormous bubble and a financial system in which well more than half of all mortgages were subprime or otherwise weak. When the bubble deflated, these mortgages failed in unprecedented numbers, driving down housing values and the values of mortgage-backed securities on the balance sheets of financial institutions. With these institutions looking unstable and possibly insolvent, a full-scale financial panic ensued when Lehman Brothers, a large financial firm, failed.
Given these facts, further regulation of the financial system through the Dodd-Frank Act was a disastrously wrong response. The vast new regulatory restrictions in the act have created uncertainty and sapped the appetite for risk-taking that had once made the U.S. financial system the largest and most successful in the world"
(Excerpt) Read more at aei.org ...
You are spot on, FRiend. This bunch has hung one ball and chain after another on the economy. And by constantly delaying implementation of their awful policies, they continue the uncertainty that causes business to hoard cash and delay hiring.
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