On Chris Dodd’s financial-regulation bill:
I think what is so interesting about the bill that’s now proposed is that it is Congress once again voluntarily emasculating itself.
The bailout as proposed in the bill would allow the executive branch on its own — without any appropriation from Congress, any approval from the Congress – to . . . essentially seize a firm that it designates (again: unilaterally) as systematically risky, take it over, have the Treasury back all of the bad loans, and then have the Fed print the money to pay them off.
Now, when we did the Chrysler bailout, or the bailout of the TARP, which we had in 2008, you had to get the Congress [to go] along. This is an interesting and, I think, a disturbing trend where so much arbitrary power is not only in Washington, but only in the executive. There is no check, no balance.
That means you get a few powerful people in Washington — [the] secretary of the treasury, head of the FDIC. You walk into a large institution and you say we might designate you systematically risky. We want you to do “x,” “y” and “z.” I can assure you they‘re going to do “x,” “y” and “z.”
And that’s the way it happens in Putin’s Russia . . . It’s not the way it should happen here. I think Congress ought to stay engaged, and how it’s willingly giving up its balancing prerogatives is remarkable. . . .
There is a huge irony in this, pointed out by Larry Lindsey . . . He also did this analysis of the Treasury and the Fed unilaterally acting –and that is that the big institutions and the banks like this, because if you know that if you lend money to these large institutions, in the end the Treasury and the Fed will come in and guarantee all the loans. That means you will preferentially lend to these institutions and it’ll end up exactly like Freddie and Fannie. They’re going to be able to then borrow at lower rates and have a competitive advantage.
So ironically, it strengthens the fed[eral government] and it also favors the big, big institutions and hurts the smaller ones. . . . [As with] Freddie and Fannie, they have an implicit guarantee. . . .
It passes. Everybody hates Wall Street. Anything that’s against Wall Street will pass.
On Bob Gates’s memo about the lack of Iran policy:
I’m interested in the memo and how Gates is denying that it was a wake-up call. His denial said instead: No, the memo “presented a number of questions” that “contribute” to a “timely decision-making process.”
Well, if you are ‘contributing to a timely process,’ it implies that the process right now is not. Time is running. You are essentially treading water and achieving nothing. So what do you need? You need a wake-up call.
In fact, this is a man who brilliantly disguised the fact that he was making a wake-up call because unless there is a third contingency — and he is the secretary of defense, and he is talking about military options, which the chairman of the Joint Chiefs also spoke about and that it would have a significant effect if it were used on Iran’s program — unless you have that, all the negotiations are entirely unserious. Either you deploy — you brandish — it as a bluff or an attempt at pressure, or you actually think of using it. But to take it off the table gratuitously — as Obama has — makes absolutely no sense.