Tags: Warren | bank | Dodd-Frank | Volcker

IBD: Sen. Warren Should Rail Against Big Government, Not Just Big Banks

By    |   Tuesday, 16 December 2014 12:16 PM

Sen. Elizabeth Warren, D-Mass., might have delivered an effective speech calling for government to curb Wall Street influence instead of falling under its spell. But it's big government that "created the monster in the first place", according to Investor's Business Daily.

The Senator caused waves of attention last week when she attacked a provision in the federal spending bill that stripped out a part of the Dodd-Frank Act that big banks like Citigroup did not like.

The provision undid language that essentially prohibits federal taxpayer bailouts for certain types of derivatives trades by banks.

Investor's Business Daily noted some media outlets proclaimed the speech was so well-received it could make Warren the next president in 2016, but "that's only possible if voters overlook the glaring problem with her argument," it added.

"Warren isn't wrong to complain that big business has too much influence over public policy. But that influence isn't the result of insufficient government intervention. It's the result of a government that is too massive and too willing to intrude in free markets."

The newspaper said Warren and her allies are overlooking the fact that big businesses like costly, intrusive regulations that handicap competitors. As an example, it said Microsoft had almost no lobbying effort until the Clinton Justice Department decided to sue Microsoft for antitrust violations. Now the software company and other tech giants spend millions to protect their interests in Washington.

"It's no surprise that Dodd-Frank — which was supposed to rein in the excesses of big banks — not only didn't get rid of the 'too big to fail' problem, it hampered community banks that used to compete with the big ones," Investor's Business Daily said.

"If Warren and her ilk really want to reduce the influence of Wall Street in Washington, they should start by calling for a drastic reduction in the size and scope of the federal government."

USA Today contributor Darrell Delamaide predicted the Dodd-Frank apparatus will not be gutted when Republicans take over both houses of Congress in January, and in any event concluded there are ample protections in the new Volcker Rule to prevent the big banks from running amok in the same way as before.

"The Volcker Rule restrictions on proprietary trading, in fact, led many — including former Federal Reserve chairman Paul Volcker himself — to consider the derivatives provision gutted last week as redundant," wrote Delamaide.

"Last week's victory may permit banks to conduct hedging activities for clients, but the Volcker Rule will still force them to put speculative derivatives trading for their own account into a separate subsidiary."

Delamaide said another level of protection against big banks came last week, when the Fed proposed a hefty capital surcharge for the eight largest U.S. banks — over and above the increases in capital requirements already imposed — that may force them to increase capital or shrink their operations.

Finally, as a last line of defense against Wall Street, he noted that any attempt in Congress to undo the Volcker Rule or other key remaining measures in Dodd-Frank "are almost certain to meet with a presidential veto."

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Sen. Elizabeth Warren, D-Mass., might have delivered an effective speech calling for government to curb Wall Street influence instead of falling under its spell. But it's big government that "created the monster in the first place", according to Investor's Business Daily.
Warren, bank, Dodd-Frank, Volcker
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2014-16-16
Tuesday, 16 December 2014 12:16 PM
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