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October 7, 2014

The Financial Cure Made the Disease Worse

The Dodd-Frank financial regulations has institutionalized the problem.

The Dodd-Frank financial regulations put in place to reform the banking industry were so successful that former Federal Reserve Chairman Ben Bernanke was turned down after he tried to refinance his mortgage. At least that’s what he told Moody’s Mark Zandi recently, according to Investor’s Business Daily. That hardly indicates a smoothly running system, unless the man who once had his hand on the steering wheel of our economy is a financial deadbeat.

Dodd-Frank, the 2,000-plus-page bill meant to cure our nation’s financial ills after the great crash of 2008, has done nothing to fix the problems it was supposed to. In fact, the legislation merely institutionalized the symptoms of the crisis. The main reason it hasn’t worked – and never will work – is because the government itself was behind the economic meltdown that wrecked Lehman Brothers and placed many other large financial institutions in the loving arms of Big Brother in Washington.

The single biggest reason for the crisis was that the federal government forced banks to give home loans to wholly unqualified borrowers because then-President Bill Clinton and his Democrat cronies wanted more minorities to become homeowners. Cheap credit mixed with Washington’s implicit guarantee that banks would be supported in their risky lending efforts created an unholy alliance that came to a painful head in August 2008. It was an end many saw coming, but few in government, particularly former Massachusetts Democrat Barney Frank, wanted to admit.

Frank, who authored the massive bill and is now retired from the House and free from the punishment of voters, admits, sort of, that Washington may have had a hand in the causes of the 2008 meltdown. Co-author Chris Dodd, also conveniently retired from the Senate, probably doesn’t lose much sleep over the whole mess either. As chief lobbyist for the Motion Picture Association of America, Dodd spends his time in sunny California, rubbing elbows with the Tinseltown elite.

Their legislation, crafted with the help of fellow Democrats and their generous donors at Goldman Sachs, JP Morgan Chase, and other “survivors” of the 2008 meltdown, did nothing to protect financial institutions from collapse. Dodd-Frank, with its ad hoc regulations and business-crushing fees, did little more than create a wall around the nation’s preferred financial institutions, making them “too big to fail.” Yet on the other hand, since Dodd-Frank became law, some 1,600 bank branches across the country have been forced to close their doors due to unmanageable fees resulting from the law’s regulations. Rest assured, though, many of the fat cats who made the risky lending decisions and the politicians who compelled them to do so are doing just fine.

Unfortunately, as long as Dodd-Frank remains the law of the land, the American economy will not be fine. And the millions of people out of work or suffering in menial jobs below their pay grade or skill level will continue to languish while Washington chugs along, telling the rest of the country that everything is just fine.

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