House Votes to Repeal Dodd-Frank at the Moment When FDIC Argues Dodd-Frank Could Have Resolved Lehman Brothers.

On April 18th, the FDIC released a paper, The Orderly Liquidation of Lehman Brothers Holdings under the Dodd-Frank Act, which explains how it could have used the resolution authority in Title II of Dodd-Frank to taken down Lehman Brothers with no losses to taxpayers and without collapsing the financial system.

This is pretty funny, because three days earlier, on April 15th, the House voted to repeal Dodd-Frank and resolution authority.

Let’s repeat that. In 2008, Lehman brothers collapsed and was put in bankruptcy, causing a wave of panic throughout the financial system. Money market funds broke the buck, liquidity was disappearing, and the government had to step in with a massive, unpopular bailout in the form of TARP. As a reminder, Paul Ryan voted for TARP.

In July 2010 the Dodd-Frank financial reform bill was passed to give FDIC powers to resolve large non-banks as if they were commercial banks, so Lehman wouldn’t go speeding into bankruptcy court and collapse the system.  Paul Ryan voted against Dodd-Frank.

In his Path to Prosperity budget he included removing Dodd-Frank and resolution authority as part of what was necessary to fix our budget problems. The actual budget doesn’t mention the CFPB, derivatives, or other parts of Dodd-Frank but instead just mentions resolution authority. That’s the power to tell banks “make a will in case you fail” and allows the FDIC to take them down as if they were a bank.

As the FDIC was preparing a document it released three days later that argued resolution authority could have prevented a panic in the case of Lehman Brothers, put losses on shareholders and creditors, gotten a high recovery from maintaining value and fired senior management, House Republicans voted to pass the Path to Prosperity, repealing Dodd-Frank removing this needed power from the government.

I’m still shocked by what the GOP is up to here.  Sheila Bair, the Chairman of the FDIC and who oversaw the report, was the counsel to Bob Dole in the Senate. How different one decade makes the Republican party.  Here’s the FDIC, run by a presumed RINO, trying to find a solution to a serious problem – how can we force a large financial company into failure without taking down the system.  Does Ryan even have a solution? His budget doesn’t. The only thing I’ve heard him mention involves coco bonds, which is an extension of resolution authority, not a substitute.  Is it just “let’s do it all again and think it will go differently?”

We do know that the largest banks are fighting resolution authority and the requirement to make living wills, which puts them on a path to no longer be too big to fail. Is it really that cynical?

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9 Responses to House Votes to Repeal Dodd-Frank at the Moment When FDIC Argues Dodd-Frank Could Have Resolved Lehman Brothers.

  1. alexlogic says:

    It’s all about the death of fair elections that occurred in 2008 in the democratic party.
    The “emergence” of MSNBC on the left and Fox on the right has created a huge vaccuum in the middle, the liberal moderate is being suffocated.

    The result is a continual battle between two sides, each which thinks the other side is the devil. Without a centrist cable news channel, the political climate will continue to get worse.

    • MSNBC is left? Are you serious? Just because Maddow has a show on there? You do realize they have one clown(JoeScar) and one unabashed racist(Buchanan) on there regularly, right?

      • alexlogic says:

        MSNBC took down Hillary Clinton in 2008. MSNBC is affiliated with a scads of liberal journalists and news organizations that made it their mission to push Barack Obama over the top against Hillary Clinton in 2008.

        The result is a huge moderate liberal vaccuum. Barack Obama’s campaign and the higher up democratic politicians such as Pelosi and Reid did so many scandalous and sleazy things during the 2008 democratic nomination race and all it got Obama was a popular vote tie with Hillary Clinton.

        Barack Obama greedily accepted tens of millions, and perhaps it even reached well over a hundred million dollars in pre-paid credit cards that had person listed on the donation! Obama was the ONLY candidate to do this in 2008.

        Obama’s group cheated in the democratic caucus contests to the point that his ENTIRE lead in delegates came ONLY from the tainted democratic caucus contests.

        Scam after scam. Illinois moving up their 2008 primary date from the end of March to the beginning of February while simultaneously punishing Michigan, desperate for attention because of a hurting economy, from counting, when it mattered most. Slugs like Michael Moore looking the other way while his own state was disrespected beyond comprehension.

        The continued denial at how fraught with dishonesty the upper democratic party handled the 2008 democratic presidential contest has led to the demonizing of both political parties by Fox and MSNBC, with no third centrist cable news channel there to rein either channel in.

        There’s a cable news cesspool right now.

    • Tim says:

      Sorry, MSNBC is not the same as Fox. I don’t enjoy programming on either, but I have never found more egregious lies than on Fox. I have never seen such violations of ethics by promoting current employees for political office.

      Sorry that you don’t like MSNBC, but equivocating it with Fox is just stupid. Period.

      • Edward Schnur says:

        Tim, get your head out of where it doesn’t belong. MSLSD is the propaganda arm of the Dem. party. Half of them are socialists Timmy. Their philosophy is anathema to anyone who understands the greatness of America. I will not equivocate Timmy, MSLSD is more dangerous than Goebles. It is a pit of liars and deceivers. Just ask yourself Tim, where is their coverage of “Fast and Furious???” Nonexistant, because it does not fit the narrative of their propaganda. C’mon Tim, think of how they were in the tank for Obama- disgusting. There were a half dozen questions, which, directed at Obama during the primaries, would have derailed his candidacy. For Example: Mr Obama, the Constitution proscribes that an individual must be a natural born citizen to be eligible for the Presidency You are not a natural born citizen, what makes you think you are eligible to be the Pres.?

  2. alexlogic says:

    may I add, liberal moderate equals moderate liberal.

  3. chris says:

    Is it just “let’s do it all again and think it will go differently?”

    Why would Republicans want it to go differently? Their core constituency made out like bandits and they seem to be effectively blaming Obama for not cleaning up the mess fast enough.

    I think it’s mostly a reflex aversion to having government try to solve a problem, any problem. They’re true believers in the Gospel according to Reagan. But they don’t really have an incentive to create a way for government to effectively solve problems created by the free market — even if they believed that was possible, by *showing* it was possible, it would discredit their entire ideology and reveal Saint Ronald as a glib fool. They must prevent government from being effective, lest it prove that government can be effective.

  4. steve2 says:

    Mike-Where in H.Con Res. 34 doe sit say they will do away with resolution authority?

    Steve

  5. Pingback: Slinking Toward Retirement | Paul Ryan Keeps Pretending Imaginary Health Care Plan Is Real — Daily Intel | News, Travel, Opinion and Just Odd and Funny Things...

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