Bachus: Republican Warnings of Collateral Damage from Dodd-Frank Already Proven Right
July 21, 2010 -
July 21, 2010
- Financial Services Committee Ranking Member Spencer Bachus today said the American economy is already suffering from collateral damage based on sloppy provisions in the Dodd Frank Act signed into law today. A change forged by Rep. Mary Jo Kilroy (D-OH) exposes the nation's three major credit ratings agencies to unlimited potential civil litigation, causing the firms to refuse to allow their ratings to be quoted in bond offering documents, thereby locking up securitization markets.
"As we worked through what became the Dodd-Frank bill, Democrats repeatedly said Republican concerns about the widespread consequences were nonsense. Today, as President Obama held a celebratory signing ceremony, it became abundantly clear that Republican warnings were exactly right.
"This reckless provision is now crippling the securitization markets that provide much of the credit needed to support Main Street businesses and the jobs they generate.
"During the financial regulatory reform debate, this outcome was specifically predicted by House Republicans, but Democrats denied any potential problems as they pushed through last minute changes with no study or analysis.
"If not fixed, this provision could lead to the rating agencies having their insurance policies cancelled as a consequence of exposure to incalculable risk of tort liability, effectively prohibiting any new competitors from entering this market to challenge the three largest and most dominant companies.
"The responsibility for ensuring our economy isn't gridlocked by damaging changes to a very major piece of legislation falls on the Democrats who proposed and supported these provisions. Unfortunately, this is only the first of what will be many harmful consequences, unintended or not, from this legislation."
NOTE: Senate Banking Chairman Chris Dodd, who drafted the bill and fully participated in these late night negotiations, even confirmed Republican concerns after conference report passage, stating that ""[n]o one will know until this is actually in place how it works."