Jul 22, 2010

"The looming enactment of the misbegotten Dodd-Frank bill, all 2,300-plus pages of it, may count as a legislative victory for the White House and Democrats in Congress, but evidence that it's a political victory is scant.  (Fully 80% of those surveyed by Bloomberg say they have little or no confidence the bill will prevent or even soften a future financial crisis.) Nor will the bill be a big win for the economy. If anything, it will hinder the recovery and weaken the financial system.

Indeed, despite all the hype from the president and his minions (about more of which in a moment) most knowledgeable observers agree that the new law will not prevent another financial crisis. No reasonable person should expect that it should.

By its very nature, the financial system relies on leverage and investor confidence. As the experience of 2008 shows, that can be an unpredictable and volatile mix. So no matter how many times President Obama says otherwise, the new law won't ban financial doomsdays. As his own FDIC chairman, Sheila Bair, says, 'No set of laws, no matter how enlightening, can forestall the emergence of a new financial crisis down the road.'"

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