By The People

There are fundamental flaws in how American government operates today,
contrary to the Constitution and the vision of a representative republican form of governance.
I intend doing something about it: by educating and informing others who
are not even aware of the dangers.

Wednesday, April 21, 2010

Wall St. Welfare: Courtesy of Senator Dodd

The following is reprinted from Downsize DC and you can send free e-faxes from its site to your representatives in DC. I use it all the time, as they articulate the message well, and it saves time.

Senate Banking Chairman Chris Dodd has quite a track record protecting Wall Street's Big Boys at your expense.
* Dodd authored the Bailout bill of 2008
* Then he secretly inserted the AIG bonus loophole into the Stimulus bill of 2009

And Dodd's not done yet! His financial "reform" bill creates a $50 billion fund. If any of Wall Street's large financial firms is on the verge of collapse, the government will take it over and use the fund to pay off creditors.
Smaller companies will be shut out of the program. If they fail, they will go bankrupt and creditors will lose their money. But if a Big Boy firm fails, its creditors will be bailed out.
Potential lenders will see that the Big Boys are protected by the government. That's a HUGE and UNFAIR advantage.
We must fight this injustice! Tell Congress to oppose this bailout scheme through's No Bailouts campaign.
You may borrow from or copy this letter . . .
Lehman Brothers went to bankruptcy court and was liquidated. That should be the fate of every poorly-run company. But Chris Dodd's financial reform bill allows struggling large firms to avoid the bankruptcy process, and creates a $50 billion fund to bail out their creditors.
Smaller firms that fail, however, will wind up in bankruptcy court and creditors will suffer huge losses.
This means potential creditors will see that there is less risk in lending to the big firms. These firms will only get bigger.
Not only is this an unfair advantage, it is unnecessary and dangerous. If big firms are failing, they should go to bankruptcy court like everyone else. As Peter Wallison and David Skeel point out, the threat of bankruptcy imposes discipline in the market. Creditors will know there are consequences in lending to weak companies.
This bill, in contrast, will protect and even encourage many of the risky and irresponsible practices that led to the meltdown of 2008. And it will likely drive out smaller firms and make our markets less competitive.
I demand that you oppose Dodd's bill and ALL bailout programs.

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