Senator Dodd and the reform of Financial Institutions (UPDATE)

First the news clip from Bloomberg.com and then my special comment.

"Senator Christopher Dodd unveiled legislation that empowers regulators to break up large financial firms, ban proprietary trading, and oversee hedge funds and derivatives, aiming to enact the most sweeping rules overhaul since the 1930s.

Dodd would let the Federal Reserve force firms to divest holdings if they pose a “grave threat” to the economy, make hedge funds overseeing more than $100 million register with regulators and require central clearing for derivatives, according to a summary released today."

Special Comment:

This crafted legislation was put together by Sen. Dodd. As you may remember, Senator Dodd of Connecticut is not running for reelection, so I wonder where he will land after he leaves the Senate where he has been in government service for over 30 years. I know he deserves to make a living doing something else if he so chooses. But he would face offers of employment from both the Banking and Insurance industry he has regulated all these years. Because I have such deep cynicism and mistrust of our leaders currently, I would hope that Sen. Dodd could put forth legislation which was based on what the America needs to avert another Financial crisis, not something which gives breaks to Wall Street and the Banking and Insurance industry. There is an inherent conflict of interest brewing here. This will be very hard for this Senator or any Senator to do, acting on the Country's behalf rather than from a vested interest. I would like to see him embrace several contentious suggestions.

First, I would like to see the Volcker Rule, (after Paul Volcker, former Chairman of the Federal reserve) included in any proposed legislation. The Volcker Rule would prohibit banks that have access to taxpayer money from engaging in speculative activities, such as hedge funds.

Secondly, I would like to see the Consumer Protection Agency NOT report into the Federal Reserve.

Thirdly, I would like to see Glass-Steagall Act reinstated. If he could get these passed, he would leave us with dignity and would cap his career in a distinguished manner and go down in history as one of the great Senators of this generation, as Sen. Ted Kennedy has on Healthcare.

UPDATE: March 16 3:00pm PST

I received this video link below from NEWSY.com and asked to Embed it here, which adds more validation over my concerns:

The disconnect between Wall Street and Main Street

Yes I believe the U.S. stock market is being manipulated by a few trading firms and I believe that it will be impossible to keep this up indefinitely. The Government has used all its tools to print money and throw it at the banking and financial system in order to keep it afloat. It has also done a lot to keep the auto industry from total collapse. It has bailed out Freddie Mac and Fannie Mae, Citi and Bank of America. But there are many other industries still facing collapse such as the Airline industry, which has been on life support for over a decade as well as the entire travel industry after 9/11/01.

We hear talk of regulation coming for the banks and insurance industry, but is has been a full year now since the collapse of Lehman and there are no new regulations in place. As recently as yesterday, President Obama called for new regulations on both and said that Wall Street hadn't learned its lessons from the crisis as he claimed that they were repeating some of the same things that got us in trouble in the first place.

So if markets are being manipulated and so far it seems to be working, does this mean we will survive this going forward. The answer is a simple No! I was asked yesterday what I thought might be a trigger to take us down again. I said that while we are able to control and manipulate our markets here in the U.S. as well as banking and financial institutions here, we can't manage and manipulate the world. I fear it will be a country in significant trouble financially that will start the next drop down. I do not believe it will be in the EU, but I do believe it will be either a country in Asia, the Middle East or Eastern Europe or Russia or one its satellite neighbors. I do not have any data or indicators other than conjecture and a strong hunch. But one thing I do really believe, the U.S. government will not be able to stop it. I fear we are in for a long struggle and a widening divide between the far right of the Republican Party and the rest of America..Eventually Wall Street must reflect what's really happening on Main Street. Right now they are totally disconnected and the stock market in my view is very over bought.

By this time in October we will know if the two differing views get reconciled, as Oct. 16th is Options expiration. This coming Friday is Quadruple Witching Options expiration for September.