Dodd Refines Bailout Rules

September 22, 2008 · Posted in Congress, Domestic Policy 

Senator Dodd has done a pretty good job of fixing what was wrong with Paulson’s proposal. Here’s the PDF summary, and here’s the PDF text.

High points:

Transparency:

  1. Establishment of an oversight board
  2. Required transparency - specifically, that the program’s details be laid out with policies and procedures
  3. Improved Reporting - Monthly reporting, and detailed financial statements describing specific transactions
  4. GAO Audit
  5. Warrants in exchange for companies selling bad assets
  6. Requirements for rules surrounding potential conflicts of interest (by fund managers involved such as PIMCO)
  7. Establishes parity between banks and money markets for FDIC insured deposits
  8. Requires standards limiting executive compensation for bailed out companies

Homeowner Assistance

  1. Court-Supervised Loan Modifications
  2. FDIC Management of Mortgage Assets
  3. Affordable Housing Funds
  4. Expansion of HOPE to allow more people to qualify

This is definitely more encouraging. I haven’t read the actual text, though, so can’t say whether the key issue of no accountability, etc has been addressed.

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    My problem here is with the foundation of the whole mess: people who qualified for these loans but couldn't keep up the payments. If we make more people qualified, more will go to foreclosure.

    If government oversight is such a good thing, why did Fanny May and Freddie Mac go belly up? An executive board? Do we want more power in the already top heavy bureaucracy? Why did both parties wait 'til now to do anything? Can we have this board anointed against witchcraft? Or anointed against financial lobbyists - too late, congress is lousy with them.

    And I know that emotionally we want the fat cat executives to not walk away from these financial car wrecks with large packages, but would we want to be operated on by a doctor who makes minimum wage? Should a multi billion dollar institution be run by a guy who makes 200 or 300 grand? I wouldn't want that job.

    I live in New York where a state comptroller (Hevesi) had to resign for misappropriation of funds, his predecessor (Carl McCall) was a front for a board (Madelaine Albright, David Rockefeller, Vernon Jordan) that signed off for an over 100 million dollar package for Grasso when he exited as the head of the New York Stock Exchange, a Governor resigned after it was discovered that he had secret accounts to finance sexscapades with hookers, and our favorite son Charlie Rangle, who heads the Ways and Means Congressional committee, is under investigation on three different counts - one being not understanding the very tax code of which he is the author! Do we really want these people working on the problem. Maybe we should let it all collapse and when the smoke clears, the strong might survive. I'm for God and country, not Morgan Stanley.
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    the real problem, though, is the derivatives. once the underlying assets go, the value of the derived assets goes, too. It's a big pyramid scheme that never should have been allowed to happen. I'm very uncomfortable with the idea of JP Morgan, BofA and Goldman Sachs owning the world, but I'm not sure there's a way out without some sort of intervention.
 

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