Paulson, Dodd: Financial overhaul prepares us for the next “inevitable” financial meltdown coming in “6 to 10 years”

July 18, 2010

Last Thursday the Senate approved the Restoring American Financial Stability Act of 2010. Weighing in at over 1400 pages and 390,000 words, it is being called the most sweeping overhaul of the financial services industry since the Great Depression of the 1930s. It creates ten new regulatory agencies to oversee virtually every conceivable form of financial transaction, from derivatives trading on Wall Street to the fees associated with debit card purchases and ATM withdrawals. There will even be a new agency called the Bureau of Consumer Financial Protections, which will be part of the Federal Reserve.

For all this, it is amazing to note that there are very few actual new policies in the bill. Rather it is mostly an enormous transfer of power from private industry, local governments, and the elected US Congress to unelected appointees at newly-created bureaucracies which will then be tasked with restructuring the US economy and creating new regulations for everyone to follow. According to the Wall Street Journal, the White House has issued a statement claiming that this will put a stop to bank bailouts, even though it is supported by Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Former Treasury Secretary Henry Paulson, the three men who forced Congress to pass the bailouts in the first place.

The paper quoted Paulson as saying, “The new tools in this legislation will help mitigate and manage the next financial crisis, which is inevitable, probably within the next six to 10 years.” This echoes the statement by Senator Christopher Dodd, reported by the Associated Press, that “It will take the next economic crisis, as certainly it will come, to determine whether or not the provisions of this bill will actually provide this generation or the next generation of regulators with the tools necessary to minimize the effects of that crisis.”

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