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Chris Dodd Has an Epiphany

Posted by Larry Doyle on November 11th, 2009 8:58 AM |

Senator Chris Dodd (D-CT)

Senator Chris Dodd (D-CT)

Senator Chris Dodd (D-CT) is in a fight for his political life. Dodd continues to trail his primary Republican opponent Rob Simmons in recent polls. More disturbing than the actual polls versus his competition is the fact that fully 51% of those polled do not consider Dodd honest and trustworthy.

What happens to individuals faced with a potential death sentence? Come to Jesus. Faced with the prospect of death, literally or professionally, individuals often will undertake drastic changes in appearance and demeanor in an attempt to stave off that deep, dark descent. In that light, I am never amazed by actions, statements, and positions put forth by politicians.

What is Chris Dodd’s epiphany? Dodd clearly smells the wrath of the American populace toward Washington and Wall Street. Few politicians have been more closely linked with these two worlds than Senator Chris Dodd. After a year’s worth of debate and discussion on financial regulatory reform, Dodd is now proposing the most sweeping and all encompassing overhaul across the entire financial industry. Is this a Hail Mary pass in an attempt to pull victory from the jaws of political defeat? The American Banker provides a wide angled view of Dodd’s desperation pass in writing, Dodd Goes for Broke with Tough Reform Bill:

A draft version of his bill introduced on Tuesday was so far-reaching it would pick a fight with virtually every entrenched interest involved in the debate, including community banks, large financial institutions, the Obama administration, House Democrats, the Federal Deposit Insurance Corp. and the Federal Reserve Board.

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A Wall St. Insider’s View of Freddie/Fannie

Posted by Larry Doyle on October 16th, 2008 6:00 AM |

I am happy to provide you with a full accounting of what occurred from the late ’90s to the present.

–The repeal of Glass-Stegall (GLBA) is a total non-event in the midst of the current economic turmoil. What this repeal did was allow commercial banks to get more deeply involved with investment banking activities. Thus, JP Morgan, Citigroup, Bank of America were able to utilize their significant balance sheets and capital bases to become a force on Wall Street. Fast forward ten years and it is those institutions that are now thankfully supporting and bailing out our system.

–Throughout the 90s and into the early part of this century, Freddie Mac and Fannie Mae were utilizing their significant lobbying power to gain an ever increasing portion of the overall U.S. mortgage market. They had the enormous advantage of being able to borrow at just marginally over U.S, government rates given the “implied” but not explicit backing of Uncle Sam. I mean, come on. That worst case scenario could never come to pass!!

While Freddie and Fannie were designed to provide liquidity to the market in the form of bundling mortgages into securities, charging a guarantee fee for return of principal to the investors in these MBS, and then selling the MBS into the private market, they decided to “grow their business”. Just how did they grow? Given their ability to borrow at very cheap rates they decided to effectively grow their own internal portfolios. This business model was nothing more than a massively levered hedge fund under the guise of “helping the homowner”. (more…)






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