Enlightened Economics

Economics for an Enlightened Age

• Wall St. Wins a Round in a Dodd-Frank Fight

Posted by Ron Robins on December 14, 2014

“Wall Street won when the House of Representatives on Thursday passed a broad spending bill that contained a provision that rolls back a rule affecting derivatives, the financial product that helped cause the financial crisis of 2008. The Senate is expected to pass the budget legislation containing the repeal this weekend.”
— Wall St. Wins a Round in a Dodd-Frank Fight, by Peter Eavis, December 12, 2014, The New York Times, U.S.A.

Commentary: Ron Robins
The rule pertains to the U.S. government back stopping losses on certain derivative products that the Dodd-Frank legislation strongly said should not be law. From the perspective of free market economics — which Enlightened Economics espouses — using American taxpayers to backstop $250 trillion of derivative products, many of which are simply gambling bets, is unconscionable. Furthermore, U.S. politicians are again cowering to the power of the banks and the bankers behind this demonstrate a deep lack of personal morality. When businesses (or banks) have a backstop like this it assuredly leads to enhanced moral hazard and ensues its use in the years ahead.

Unfortunately, the losses with its use could bring the edifices of modern finance crashing.

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