ATR — Violating privacy one bank account at a time

Sen. Christopher Dodd’s “regulatory reform” bill, S. 3217, the Restoring American Financial Stability Act of 2010, has many contentious proposals that have members from both political parties on edge.

The bill cauterizes “too big to fail” by establishing a Financial Stability Oversight Council that would indentify politically important institutions, sending the signal that some companies are indeed too big to fail.

It creates a permanent bailout authority by authorizing the Federal Deposit Insurance Corporation (FDIC) to “make available … funds for the orderly liquidation of covered financial institutions.”

This bill does nothing to address the problems created by Fannie Mae and Freddie Mac. Rather it makes permanent the failed risky lending policies of the past by paying banks to advertise and seek out low-income people who would otherwise not qualify for loans. The bank, backed by the government, issues risky loans and either the loan is paid back on time, in which case the bank keeps all the profits, or the loan defaults and the government uses taxpayer money to cover the bank’s loss. Win-win for government-backed banks, total failure for taxpayers.

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