Chairman Jeb Hensarling

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It’s the Republicans’ Fault!
Posted by on June 16, 2011

During the June 14th Financial Institutions and Consumer Credit Subcommittee hearing that examined whether the Dodd-Frank Act really ended “too big to fail” (as some Democrats claim it did), Ranking Member Barney Frank said it is the Republicans’ fault for creating a “false perception” that “too big to fail” lives on:

 “The only people who are arguing that…if a large financial institution

gets in trouble the government will step in and bail it and let it continue

are some of the Republican critics of [Dodd-Frank]. They are the ones

creating that false perception.”

 Really?

 “Instead of breaking up banks, Dodd-Frank separates banks with more than US$50 billion in assets and certain other large financial institutions into a class of “systemically important” entities — too big to fail by another name...Inevitably, “systemically important” will come to mean “protected by Uncle Sam.” -  Eric Schurenberg, Fiscal Times

 “The Dodd-Frank Act deliberately did not end the era of too-big-to-fail institutions. Despite calls by top economists and academics, the Obama administration did not try to break up the big banks, apparently deciding that a $14 trillion economy needed to have large banking institutions.” - Steven M. Davidoff, University of Connecticut School of Law

 “The [Dodd-Frank Act] claimed to end the era of “too-big-to-fail” institutions and sought to address the fundamental structural weaknesses and conflicts within the financial system. To falsely declare an end to Too Big to Fail without actually accomplishing that end is more damaging to the credibility of U.S. markets than a failure to act at all... In fact, Dodd-Frank reinforces the market perception that a small and elite group of large firms are different from the rest.” - Josh Rosner, managing director of Graham Fisher & Co

“The Dodd-Frank bill now defines what a systemically important financial institution is, which makes it now a kind of broad notice that these are the institutions that are 'too big to fail.' That means we will further concentrate our financial system to these powerful few companies, and therefore make it even more fragile in the sense of financial vulnerability to the taxpayer. I don't think that's healthy.” - Thomas Hoenig, the President of the Federal Reserve Bank of Kansas City

"[T]here is nothing [in Dodd-Frank] that ensures our biggest banks will be safe enough or small enough or simple enough so that in the future they cannot demand bailout -- the bailout potential exists as long as the government reasonably fears global financial panic if such banks are allowed to default on their debts." – Simon Johnson, MIT

“In the future we may have to do exceptional things again if we face a shock that large.” – Obama Administration Treasury Secretary Timothy Geithner

“It was apparent to SIGTARP from the context of the interview, including the reference to doing something exceptional “again” in the face of a future financial crisis, that Secretary Geithner was referring to the possibility of future bailouts.”  -- Office of the Special Inspector General of the Troubled Asset Relief Program

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