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Capital Hill Watch Alert

Restoring American Financial Stability Act of 2010 (S. 3217)

The Senate is expected to vote on the Restoring American Financial Stability Act of 2010 (S. 3217 ) [S. 3217; To view, visit: Full Text of Legislation) as early as Wednesday, May 19, 2010.

Currently, the more than 1,600 page financial overhaul bill is being rushed through the Senate as was the landmark health care legislation with no one exactly sure what is in it.  Prior to the Democrats taking control of Congress, legislation that radically changed the way Americans conducted their daily lives was usually subject to long debate and deliberation before a decision was reached.

The financial reform that US Senator of Connecticut Christopher Dodd (D) has crafted contains little if any input from the Republicans.  And with a 59-41 majority in the Senate the need for compromise is not required according to Senator Dodd and his Democrat colleagues.

Once again President Barack Obama used language to say what he does not mean when he made his case during his speech on financial reform on Thursday, April 22, 2010, in New York and invited Americans to debate this legislation in his speech.  However, Senate Majority Leader Harry Reid (D-Nevada) announced on the same day President Obama called for Americans to debate this legislation, that there could be a vote on the Restoring American Financial Stability Act of 2010 as early as Monday, April 26, 2010.

What is known about the legislation.

What is currently known about the legislation is very bad. For example, it puts smaller, entrepreneurial financial houses at a serious competitive disadvantage to bigger firms such as Goldman Sachs that give millions of dollars to Democrat candidates. And, it makes bailouts a routine part of America's financial markets.  For example, created with taxes on financial institutions, the Senate bill provides for a $50 billion resolution fund.  Through higher costs for credit products — consumers, including families, small business and family farms would pay for  that $50 billion. And similar to the backdoor bailout of Goldman Sachs with money the Feds gave to AIG, regulators would be able to use this fund to pay off creditors of failing firms.  Wrongly, American taxpayers would be forced to pay to bailout failing firms on Wall Street.

Furthermore,  the legislation allows the Federal Deposit Insurance Corporation (FDIC) to borrow as much as it needs to bailout failing financial firms if they "pose a threat to United States (U.S.) financial security."

Untouched is Fannie Mae and Freddie Mac, whose failed policies triggered the housing crisis in 2005 with an unparalleled surge in mortgage lending. Wrongly, for the two largest global mortgage banking companies, the American taxpayer is liable for a $400 billion bailout. To regulate banks as well as financial companies across the board, sweeping new powers would be given to the Federal Reserve. What should trouble one about this is the Federal Reserve would be required by the bill to set capital levels, liquidity requirements and permissible activities for each type of business and for each individual institution when they have never regulated a hedge fund or an insurance company. Also, by authorizing the Federal Reserve to regulate firms that are considered "systemically important," the Democrat measure keeps "too big to fail" alive. This special regulatory structure clearly sends the wrong signal to the markets that those firms have the implicit guarantee of the U.S. government.  By providing advantages for those select firms to the detriment of small ones, this would permanently distort the financial markets.

The unknowns of the measure.

One can only wonder what will be found on further inspection of the legislation. As was the case with health care reform legislation, this measure also will make the system more complex, less accountable with taxes and loopholes and political quid pro quo favors.  The problems of America's financial system are not fixed by the financial reforms proposed so far by President Obama and the Democrat Congress. The government's own regulatory failings — the very ones that resulted in the financial crisis — are being used to make scapegoats of the financial industry.

President Obama and the Democrats once again want to stealthfully push through legislation that expands the control of the federal government over the private sector. There is no doubt that Wall Street needs regulation that will work and will not, as the current legislation does, turn one of this nation's most sophisticated industries into a wholly-owned subsidiary of the federal government. 

US Senator of Connecticut Christopher Dodd's (D) reform bill gives the federal government unprecedented control over Wall Street without changing any of the perverse incentives that created the financial crisis and is the centerpiece of President Obama's regulation efforts.

A complex issue that requires more than empty rhetoric by President Obama and the Democrats in Congress is regulating the financial service industry.  The Restoring American Financial Stability Act of 2010 (S. 3217) will infantilize an entire industry and make it a political pawn of the federal government.  Tragically, omitted is the central issue — the role that the government played in nearly bringing down the system, specifically Fannie Mae and Freddie Mac which have so far cost the American taxpayer $400 billion.


  1. Why No Debate?,  Investors Business, April 23, 2010.
  2. Mike Pence, Dodd Bill Sends Wrong Signal To Wall Street, April 22, 2010.
  3. Bull On Wall Street, Investors Business Daily, April 22, 2010.
  4. Alexander Bolton, Votes in doubt as Sen. Harry Reid sets Monday Wall Street showdown, The Hill , April 22, 2010. 

What Can You Do?  

Urge your senators to NOT SUPPORT  the Restoring American Financial Stability Act of 2010 (S. 3217 ) 

Contact Information:    

Capitol Hill Switchboard Numbers: 202-224-3121 (This number will direct one to the Capitol Hill operator. Ask for ones senator's office.)  

To go to you senators' websites, find their E-mail or to find out who your senators are...


Addressing Correspondence:    

The Honorable (full name)
United States Senate
Washington, DC 20515  

Dear Senator (last name):  






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