Dodd's Plan Is OK I Guess....

...Only because Barney Franks proposal was an absolute abomination.

http://dodd.senate.gov/?q=node/5321

He proposes a single US Systemic Regulator. He also is proposing to pair back the Feds/FDIC's power and responsibilities. The real truth here is again. How are we going to try to regulate TBTF Institutions? What is the process to resolve insolvent TBTF Institutions? Senator Dodd's plan to curtail the FEDS power is superficial because the FED currently doesn't even use those powers anyway. The FDIC is currently the best agency to regulate systemic risk. This is because unlike the FED they don't have the problem of Regulatory Capture. They are somewhat politically removed from the process. I cant take the FED seriously after they willfully ignored the asset bubble that leveled the economy.

Its not a question who controls the banks but how we control them. We have to get back to the public purpose of banking. After all is it not the banks that are gambling with deposits? The public purpose of banking is to provide a payment system and a prudent lending system that is designed by regulators. Where is the public purpose of off balance sheet assets? SIVS? CDS? Interest Rate Derivatives? Leave this to the Investment Banks not deposit banks. We can't take any type of financial reform seriously if it doesn't at the heart of the matter break up TBTF Financial Institutions. Ultimately banks have a public/private partnership that prices risks in the private sector, rather the public sector pricing in risk owned by the banks. Banks should not be allowed to securitize, own CDS insurance, and develop complex derivatives. Let the investment banks do all of that.

I am not some nut who has no practical experience here. I have worked on Wall Street for 20 years trading all types of complex exotic financial instruments. The only reason these products were ever created was to make bankers and traders even more rich. Guess what? That's fine if its the Investment Banks that do it with their money! Leave the bank deposits alone.

We can start by getting a plan that gets rid of the biggest fraud in banking circles, which is Fractional Reserve Banking, which is the root of whats wrong in the system.