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WSJ Interview with Chris Dodd

Posted by Larry Doyle on September 9, 2013 9:37 AM |

As the 5 year anniversary of the demise of Lehman Brothers approaches, I would expect to see a steady stream of reviews of that critical period and interviews with some of the players involved.

Do not expect any mea culpas from those who brought our nation to its knees but let’s take a closer look at what former US Senator Chris Dodd has to say about those fateful days and his attempt to clean up a mess that he was party to creating in the first place.

The WSJ recently interviewed him regarding the financial regulatory reform legislation that has his name attached:

. . . we did the best we could but you’re sailing in the dark to a large extent.  When we wrote the Too Big To Fail provisions in the Bill, the Dodd/Frank legislation I think we got it right and there are more and more indications we may have but the ultimate test will be when you’re called upon to really make it work so I’m sure there are unintended consequences . . .

My “sense on cents” translation? Dodd can not and does not provide a clear cut statement as to what was passed because the legislation was a mere blueprint and the actual text is being largely reworked by those within the Fed and members of financial committees atop Capitol Hill who continue to have the feedbag on.

Seib:  Do you think core problem that you mentioned at the outset, the too big to fail, has that really been solved?

Dodd:  We think so but again, it will take a test in time.

Really? Dodd applies a massive qualifier to the greatest question of all. No rational observer believes we have solved the question as to whether our largest banks are “too big to fail.”

Seib:  Do you worry that we still have regulators tripping over each other doing the same things one on top of the other?

Dodd: Yeah.

He’s got that right.

Seib:  There’s the regulatory structure and there are processes but there’s also attitudes; I wonder if you think Wall Street has learned its lesson.  You can regulate the activity but you can’t necessarily regulate mind set.  How do you think we’ve come on that path?

Dodd:  Not far enough.  I get asked the question a lot – tell me what you are trying to do with this Bill and obviously the too big to fail and oversight transparency consumer protection but the one word I constantly kept in my mind through all of this was the word confidence.  It had been shattered by this process and restoring it was critical, you can’t quantify it, I can’t legislate it, you just hope that by creating or doing certain things you restore that, consumer confidence, investor confidence.  I still think we haven’t closed that gap despite all the other things we’ve done and a lot of that comes in my view from the community itself, the recognition that we did get off track.

He is right on this point as well. I wish the interviewer probed him further as to how the players on Wall Street and Washington got off track and remain off track. The fact is both entities are very much on the track they wish to occupy while consumers, investors, and taxpayers are on an entirely different track.

Seib:  Do you think that confidence factor is one of the reasons that having gotten through the worst of the crisis and having changed the system we’re still seeing an unsatisfactory economy.  Unemployment has not really been resolved, the housing sector is not really fully back, is that a confidence issue?

Dodd: I believe it is.

Dodd would clearly like to remain relevant in our national discussion. I appreciate his speaking more freely in this interview than I ever heard him speak while in Congress. Yet, we will NEVER receive the total story as to what transpired between Wall Street and Washington if journalists talk only to the inmates who ran the asylum.

Navigate accordingly.

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.

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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. 

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