Overhaul of Dodd-Frank Legislation
I am writing as a former Internal Auditor at Freddie Mac who left in the midst of the economic collapse following the closure of Lehman Brothers.
I also am writing after watching the midnight mark-up of the Dodd-Frank Wall Street Reform Act passed at the end of the last Congressional session.
The biggest failure of Dodd-Frank is that it does nothing to resolve the biggest issue facing our failing economy: resolving how to handle the behemoth Government-Supported Entities (GSEs).
Neither the Administration nor Congress seem willing or able to come together to even discuss the issue, much less resolve it.
“Yesterday, the Commodities Futures Trading Commission (CFTC) announced that it would gather to consider a fix to allow the over-the-counter derivatives market to operate as usual until they finish new rules, answering industry concern about what will happen after regulators miss the July deadline set out in the Dodd-Frank law.” (Jamila Trindle, WSJ, June 7, 2011)
The Dodd-Frank financial overhaul law passed by Congress last summer gave the CFTC new authority to oversee over-the-counter derivative deals called swaps. Parts of the law that require rule-writing won’t go into effect until after the rules are written, but lawyers and industry representatives have raised concerns about other parts of the law that could automatically take effect on July 16.
Chairman Gary Gensler said last week that the CFTC and the Securities and Exchange Commission are aware of the problem and are coming up with lists of parts of the law that might need further clarification before the deadline.
Lawyers who negotiate derivatives trades are concerned that Dodd-Frank could throw the market for swaps into legal limbo. (Jamila Trindle, WSJ, June 7, 2011)
I assure you that a Congress that has been unable to pass a budget for over 770 days will be unable to come to agreement on how to regulate the derivatives market.
Until Freddie and Fannie or some newly-created or overhauled organization is put in place to manage the Mortgage Market, the economy will continue in its anemic way, to stumble along.
I urge the Republicans in the House to take charge of this issue and to move to put this organization in place.
Stimulus aside, this is what most hurts the economy.
“It [must] be demonstrated that the most productive system of finance will always be the least burdensome.”
– Alexander Hamilton