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Paul Ryan: Dodd-Frank Goes In Wrong Direction

Posted by Larry Doyle on May 10, 2013 7:10 AM |

America is increasingly aware that banks that are too big to fail, trust, regulate, prosecute, and jail are thus — duh — TOO BIG TO EXIST!!

This basic principle espoused by anybody with even a modicum of “sense on cents” is gaining momentum in Washington given the growing bipartisan support for the Brown-Vitter Bill to address the too big to fail reality.

I personally believe the Brown-Vitter Bill should only be an initial pit stop on our way to breaking up these mega-banks that own Washington and run our country. Who recently weighed in on these topics? 

Paul Ryan (R-WI) had the following to say to his constituents in a town hall in Wisconsin:

Banks are getting really big, and they are using the value of their deposits to go do other things that are really not banking and jeopardizing the stability of the system.

Dodd-Frank goes in the wrong direction. It creates a permanent bailout fund. It deems very large, interconnected  banks as too big to fail, meaning the government will back them up if they go down. And that means these really large banks can go into the markets and get money at a much cheaper rate than your community bank.

I also believe in what we call the Volcker rule, which means if you’re going to act like a hedge fund then be a hedge fund. If you’re going to be a bank, then you have to be regulated like a bank.

Meaning separate the ability of banks to take the implied subsidy of insured deposits and leverage that. I think that was one of the mistakes that was made.

What else does he have to say? Listen to this brief 2-minute clip.

Too big to fail, trust, regulate, prosecute, and jail . . . then — duh — BREAK ‘EM UP!!

Navigate accordingly.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • fred

    LD,

    Thought you might appreciate this post by Jeff Tucker and Glenn Reynolds at the Laissez Faire Club and Instapundit. The tie in to your post, it applies equally as well to service industries like banking and banking products such as mtg originations, student loans, etc.

    Extending the GAS CAN analogy, when you combine regulatory capture with bureacratic inefficiency and ineptitude, the mix becomes highly flammable.

    HOW GOVERNMENT WRECKED THE GAS CAN. “I’m pretty alert to such problems these days. Soap doesn’t work. Toilets don’t flush. Clothes washers don’t clean. Light bulbs don’t illuminate. Refrigerators break too soon. Paint discolors. Lawnmowers have to be hacked. It’s all caused by idiotic government regulations that are wrecking our lives one consumer product at a time, all in ways we hardly notice. It’s like the barbarian invasions that wrecked Rome, taking away the gains we’ve made in bettering our lives.”

    The gas gauge broke. There was no smartphone app to tell me how much was left, so I ran out. I had to call the local gas station to give me enough to get on my way. The gruff but lovable attendant arrived in his truck and started to pour gas in my car’s tank. And pour. And pour.

    “Hmmm, I just hate how slow these gas cans are these days,” he grumbled. “There’s no vent on them.”

    That sound of frustration in this guy’s voice was strangely familiar, the grumble that comes when something that used to work but doesn’t work anymore, for some odd reason we can’t identify.

    I’m pretty alert to such problems these days. Soap doesn’t work. Toilets don’t flush. Clothes washers don’t clean. Light bulbs don’t illuminate. Refrigerators break too soon. Paint discolors. Lawnmowers have to be hacked. It’s all caused by idiotic government regulations that are wrecking our lives one consumer product at a time, all in ways we hardly notice.

    It’s like the barbarian invasions that wrecked Rome, taking away the gains we’ve made in bettering our lives. It’s the bureaucrats’ way of reminding market producers and consumers who is in charge.

    Surely, the gas can is protected. It’s just a can, for goodness sake. Yet he was right. This one doesn’t have a vent. Who would make a can without a vent unless it was done under duress? After all, everyone knows to vent anything that pours. Otherwise, it doesn’t pour right and is likely to spill.

    It took one quick search. The whole trend began in (wait for it) California. Regulations began in 2000, with the idea of preventing spillage. The notion spread and was picked up by the EPA, which is always looking for new and innovative ways to spread as much human misery as possible.

    An ominous regulatory announcement from the EPA came in 2007: “Starting with containers manufactured in 2009… it is expected that the new cans will be built with a simple and inexpensive permeation barrier and new spouts that close automatically.”

    The government never said “no vents.” It abolished them de facto with new standards that every state had to adopt by 2009. So for the last three years, you have not been able to buy gas cans that work properly. They are not permitted to have a separate vent. The top has to close automatically. There are other silly things now, too, but the biggest problem is that they do not do well what cans are supposed to do.

    And don’t tell me about spillage. It is far more likely to spill when the gas is gurgling out in various uneven ways, when one spout has to both pour and suck in air. That’s when the lawn mower tank becomes suddenly full without warning, when you are shifting the can this way and that just to get the stuff out.

    There’s also the problem of the exploding can. On hot days, the plastic models to which this regulation applies can blow up like balloons. When you release the top, gas flies everywhere, including possibly on a hot engine. Then the trouble really begins.

    Never heard of this rule? You will know about it if you go to the local store. Most people buy one or two of these items in the course of a lifetime, so you might otherwise have not encountered this outrage.

    Yet let enough time go by. A whole generation will come to expect these things to work badly. Then some wise young entrepreneur will have the bright idea, “Hey, let’s put a hole on the other side so this can work properly.” But he will never be able to bring it into production. The government won’t allow it because it is protecting us!

    It’s striking to me that the websites and institutions that complain about government involvement in our lives never mentioned this, at least not so far as I can tell. The only sites that seem to have discussed this are the boating forums and the lawn forums. These are the people who use these cans more than most. The level of anger and vitriol is amazing to read, and every bit of it is justified.

    There is no possible rationale for these kinds of regulations. It can’t be about emissions really, since the new cans are more likely to result in spills. It’s as if some bureaucrat were sitting around thinking of ways to make life worse for everyone, and hit upon this new, cockamamie rule.

    These days, government is always open to a misery-making suggestion. The notion that public policy would somehow make life better is a relic of days gone by. It’s as if government has decided to specialize in what it is best at and adopt a new principle: “Let’s leave social progress to the private sector; we in the government will concentrate on causing suffering and regress.”

    You are already thinking of hacks. Why not just stab the thing with a knife and be done with it? If you have to transport the can in the car, that’s a problem. You need a way to plug the vent with something.

    Some boating forums have suggested drilling a hole and putting a tire stem in there and using the screw top as the way to close the hole. Great idea. Just what I wanted to do with my Saturday afternoon, hacking the gas can to make it work exactly as well as it did three years ago, before government wrecked it.

    You can also buy an old-time metal can. It turns out that special regulations pertain here, too, and it’s all about the spout, which is not easy to fill. They are also unusually expensive. I’m not sure that either of these options is ideal.

    It fascinates me to see how these regulations give rise to market-based workarounds. I’ve elsewhere called this the speak-easy economy. The government bans something. No one likes the ban. People are determined to get on with their lives, regardless. They step outside the narrow bounds of the law.

    It wouldn’t surprise me to find, for example, a sudden proliferation of heavy-duty “water cans” in 1- and 5-gallon sizes, complete with nice spouts and vents, looking almost exactly like the gas cans you could get anywhere just a few years ago. How very interesting to discover this.

    Of course, this law-abiding writer would never advocate buying one of these and using it for some purpose other than what is written on the package. Doing something like that would show profound disrespect for our betters in the bureaucracies. And if I did suggest something like that, there’s no telling the trouble that it would bring down on my head.

    Ask yourself this: If they can wreck such a normal and traditional item like this, and do it largely under the radar screen, what else have they mandatorily malfunctioned? How many other things in our daily lives have been distorted, deformed and destroyed by government regulations?

    If some product annoys you in surprising ways, there’s a good chance that it is not the invisible hand at work, but rather the regulatory grip that is squeezing the life out of civilization itself.






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