Chris Dodd is an A@@hat and a Traitor

[TripleB]

Chris Dodd is a former Senator with 30 years of public politician experience. He launched the Dodd-Frank act recently, which seemed like "feel good" legislation for banking reform, but when you dug into it, realized it was pushed by big banks to force small banks out of business, allowing big banks to absorb small regional banks for pennies on the dollar and give big banks a monopoly.

I'd be willing to bet my life that Chris Dodd received substantial contributions from big banks.

Mr. Dodd left office in 2011 and was immediately nominated to be CEO of the MPAA! Today he publicly threatened politicians who didn't support SOPA, and admitted to bribing them for their vote.

Mr. Dodd is a criminal of the worst kind and should be charged with treason and publicly executed. All of his assets should be seized, including all transferred to family members. The government finds it's suitable to perform asset forfeiture against drug dealers, how about against real criminals who profit by destroying our country?

http://www.techdirt.com/articles/201201 ... l#comments

[Lone Wolf]

If I'm looking for a silver lining, it's nice that Dodd plainly admitted that he and the rest of the SOPA lobbyists demanded quid pro quo.  We've known this all along, obviously, but it's still refreshing when people tell you the truth, even when they do so unintentionally.  It's a nice change from him assuring us all (Baghdad Bob style) that Fannie Mae and Freddie Mac were "fundamentally strong".

Dodd really is the worst sort of politician.  But ultimately he (and all of his corruption and bad ideas) are just a symptom of how dangerous an unchecked, all-powerful central government really is.  To a business, corrupt politicians are just another commodity.  If you shrink government (particularly the federal government) to the minimum necessary size, you eradicate the value of that commodity.  People like Chris Dodd have to find real jobs.

Take it away, Harry:

"Lord Acton said, 'Power tends to corrupt, and absolute power corrupts absolutely.' The corollary to this is that without power, there can be no corruption -- for the politician has nothing to sell."

-- Harry Browne

[moda0306]

LW,

Coming from the income tax side, I'd just like to point out that multi-state tax laws and regulations are an absolute nightmare to businesses that do a lot of multi-state business.  One central regulatory agency is much easier to follow.

If you sell products or services to a state, it opens you up to a whole other rigamaroll of regulations and protectionist tax codes to deal with.

Maybe it's just me, but I think for multi-state operations, the federal government is much less of a burden than all the state gov'ts.  If you eliminated most of the role of the federal government, then gave those responsibilities, even in a generally less intrusive form, to the states, I think you'd have made it actually more difficult for many operations to do business.

I'm almost more looking at the reality of fed deregulation than the general principal behind it.  I have spent some time in state/local taxation and it's really transformed my view of the realities of what is truly hampering business at a regulatory & taxation level.  The complications and protectionism on display is mind-boggling.

[MachineGhost]

"Lord Acton said, 'Power tends to corrupt, and absolute power corrupts absolutely.' The corollary to this is that without power, there can be no corruption -- for the politician has nothing to sell."

-- Harry Browne

Sorry, but he's absolutely wrong.  It's not power that corrupts, its weakness.

Maybe it's just me, but I think for multi-state operations, the federal government is much less of a burden than all the state gov'ts.  If you eliminated most of the role of the federal government, then gave those responsibilities, even in a generally less intrusive form, to the states, I think you'd have made it actually more difficult for many operations to do business.

And then we'd be back to the Articles of Confederation, which didn't work, which prompted the colonies to come up with the Constitution for the United States with this most important clause:

"To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."

...which has been perverted by all reason by the Judicial branch to justify statism and a Progressive-agenda (not that there's anything wrong with that, but it was and is still clearly unconstitutional).

I'm almost more looking at the reality of fed deregulation than the general principal behind it.  I have spent some time in state/local taxation and it's really transformed my view of the realities of what is truly hampering business at a regulatory & taxation level.  The complications and protectionism on display is mind-boggling.

Indeed, the best thing a Federal government can do is deal with coordination failures in the free market.  If it had been limited to just doing that as the Constitution intended, we'd have a more libertarian Republic today instead of this sick mess of socialist corporatism.

MG

[Lone Wolf]

"Lord Acton said, 'Power tends to corrupt, and absolute power corrupts absolutely.' The corollary to this is that without power, there can be no corruption -- for the politician has nothing to sell."

-- Harry Browne

Sorry, but he's absolutely wrong.  It's not power that corrupts, its weakness.

Can you expand on why you disagree?  Crony capitalists bribe corrupt politicians like Chris Dodd because of... weakness?  Whose weakness do you mean?

Coming from the income tax side, I'd just like to point out that multi-state tax laws and regulations are an absolute nightmare to businesses that do a lot of multi-state business.  One central regulatory agency is much easier to follow.

True, but I think that will largely be up to the state and how "business-friendly" they wish to be.  If your state chooses to be a bureaucratic pain in the butt, you (and your business) can move to one of the other 49 states.  When the Federal government comes up with some absurd regulation or ensnares you in a disastrous national health care boondoggle, there's no place to hide.

No state, of course, should be permitted to interfere with interstate commerce.

If you sell products or services to a state, it opens you up to a whole other rigamaroll of regulations and protectionist tax codes to deal with.

It's interesting that you run into a lot of protectionism.  The Federal Government has the Constitutional authority to forbid protectionist behavior between the states.  Has it been your experience that they do a poor job at this?  Shouldn't this (along with national defense) be one of the chief responsibilities of the Federal government?

[moda0306]

LW,

To your last two points...

States ARE relatively friendly (usually) to in-state businesses.  They don't want to lose them.  It's when other businesses with broad service/distribution networks that AREN'T located in your state, but are simply selling services and products to your state, that states get extremely grabby.

For instance, "apportionment," which is the set of factors that decides how much of your business income is taxable in one state vs another, used to be a mix of factors (payroll, revenues, and fixed assets)... now states are moving to revenue-only formulas.  This in and of itself isn't a big deal, but it highlights that they'd much rather punish businesses that hire people and hold physical locations outside of the state.

They do aggressive things with sales tax and other tax calculations that try to get as much money as possible from out-of-state businesses that so much as dabble in their state.  The Washington B&O tax is an example of an extremely heavy handed tax, that goes beyond the reach of the typical sales tax in grabbing money from out-of-state businesses that do any sort of business in their state.  Michigan Gross Receipts tax is another... there are others I'm not remembering now, but if there's anything around my office that pisses people off, it's the attitude of state governments (even ones like Texas with their franchise tax) in the current economy towards what could really be described as protectionist revenue grabs.

So it's quite natural for states to favor the businesses with in-state locations and employees via a tax code that punishes "imports," if you will.  I would say that while it may be a stretch of the federal government's authority (I'm really not sure), they should step in a create a more free and fair state taxation template that states can build their model on... This would seem to me to fall into the realm of regulating interstate commerce, but I'm no expert.

[Storm]

Agreed, Dodd is the worst kind of traitor.  Remember, he also got a juicy mortgage from Countrywide before passing favorable housing legislation that set us up for the housing crash.  The man has singlehandedly done more to destroy this country than almost any other politician.

[moda0306]

Storm,

I believe the private sector lending independent of the Fannie/Freddie guarantees had much worse practices and were more responsible for the bubble than Fannie/Freddie were.

Other than that I agree... just pointing out that he may not have been as responsible for the housing bubble/crash as we would naturally think.

[Lone Wolf]

I believe the private sector lending independent of the Fannie/Freddie guarantees had much worse practices and were more responsible for the bubble than Fannie/Freddie were.

Here's why it's all about Fannie and Freddie -- they owned the majority of the mortgages in the country!  They'd buy absolutely anything!

If you're a private lender and you know that the GSE's will vacuum up any awful loan that you make, what incentive is there to behave responsibly?  What incentive do the GSE's have to behave responsibly when they enjoy special privileges and an implicit government guarantee?

Any time you separate a bad actor from the bad consequences of their actions, you get bad results.  That's why it's dangerous to distort markets in this way.  The "privatized profits and socialized losses" thing just doesn't work.

[moda0306]

LW,

I'm quite sure F&F bought much higher quality loans than the ones being perpetuated in the rest of the market... but I have more to learn about exactly what kind of moral hazards they built into the system.

I find it quite odd that several European countries had housing bubbles as well... and these were countries without the kind of GSE's that we had here... but a lot of the same bank deregulation.

Another piece of info to help bring this into focus is that these GSE's not only existed during the 1940's-1970's, but were under much more government control, with much less "market discipline" to keep them from causing bubbles.  They only later became quasi-private entities that were supposed to be more subject to market discipline.  We had some local housing bubbles over that period, but for the most part it was a period of very solid balance-sheets and not too much overleveraging.

Further, Texas had very strict mortgage regulations and avoided the housing crisis for the most part.  

I think there's more to this story than Fannie & Freddie.  I don't have all the answers about all this, but the facts aren't aligning to "it was the gubment's fault."

I'll add that I think the #1 cause of the housing crisis is undereducated, hive-minded group-think.  "The free market," at various points, could and should have stepped in to question the sustainability of housing prices and the debt involved.  This includes banks, investors, and home buyers.  The hive mind of the market didn't do this.

Here are a few articles outlining some of the points against F&F being the fundamental cause of the crisis.

http://www.theatlantic.com/business/arc ... is/250121/
http://www.econbrowser.com/archives/200 ... e_and.html
http://www.nytimes.com/2011/12/24/opini ... g-lie.html

[Lone Wolf]

I find it quite odd that several European countries had housing bubbles as well

Europe had far lower levels of default than the US.  IMO that points to a much lower quality of loan in the United States.

The GSEs totally dominated the secondary mortgage market.  These entities would buy any conforming loan that you handed them.  This was possible thanks to their credibility, implicit government guarantee, and direct line of credit with the Treasury.  This all worked great... until it didn't.

Under a free market you might still have bubbles, but in the end you as the investor are the one facing ruin, not the taxpayer.  That instills discipline and better behavior while rewarding those who do not make foolish decisions.

[moda0306]

The GSEs totally dominated the secondary mortgage market.  These entities would buy any conforming loan that you handed them.  This was possible thanks to their credibility, implicit government guarantee, and direct line of credit with the Treasury.  This all worked great... until it didn't.

LW,

GSE's didn't start buying subprime junk loans until 2005.  The bubble had all but topped out by this point.  This indicates that the private sector was generating these things without any real backing by F&F.  There was no F&F-backed moral hazard built into the financial architecture of the worst of the bubble.  

Also, I think the Euro housing bubble deserves a little more consideration than "they had fewer defaults."  If they had a housing bubble without government influence, then there's probably some free-market causes we should be looking at here.

What about the bigger bubble in commercial real estate?  Further, how did helping poor & middle class people buy homes make $2 Million homes sell for $3 Million while their class of ownership (wealthy individuals) were mostly doing better and better financially?  What about the fact that fannie & freddie were a big part of the market going all the way back to the 40's without housing crises occuring?  Could it have been the deregulation of the 80's and 90's, as the Texas situation might indicate?

When you deal with informational assymetry, and attempt to band-aid it through derivative contracts and risk pools, where almost everyone involved is selling a bill of goods that they have no real stake in, you're going to get what happened.  It'd be better for people to avoid these things they don't understand, as HB has said, but it's the very nature of people saving, investing, borrowing and buying homes that you need some infrastructure of honesty for the other people involved.  These contracts were perpetuated by deregulation, and this is what drove the crisis.  It would have probably happened without F&F, as indicated to banks and other financial institutions that were setting up ridiculous loans, and farming them to 401k plans through the wall street machine far before F&F were ever interested in buying these things.  There was a stream-line of this junk-debt, but for the most part it wasn't through F&F during the build up of the crisis, but through the machinations of Wall Street.

[moda0306]

Don't get me wrong... inputting government-backed moral hazards into the financial & real estate system definitely has the potential to derail the system and create bubbles.

Likewise, deregulation of a market that few understand but that everyone relies upon has the same potential.

This time around, it would appear that the latter had at least as much to do with the housing bubble/crisis, if not quite a bit more.