Putting His Money Where is Mouth Is
Putting His Money Where His Mouth Is

According to Politico:

Sen. Chris Dodd (D- Conn.) pledged Sunday that Congress will hold multiple hearings “right away” to explore how computerized trading allowed the markets to plunge suddenly this week.

“We need some answers pretty quickly on this issue,” the chairman of the Banking Committee said on CBS’ “Face the Nation.”

He said the Securities and Exchange Commission needs to “step up very quickly and let us know what happened here and what steps need to be taken.”

“I don’t think you need legislation in this area, my guess is,” Dodd said. “You need the regulators to step up and make sure that this high frequency trading, this flash trading that’s going on…that clearly is something we ought to take a look at.”

He appeared on CBS’ “Face the Nation” with Sen. Richard Shelby (R-Ala.), the ranking member on the Banking committee. Shelby seemed to agree with each of Dodd’s points on the flash trading issue.

“I believe what’s really happened is the technology has gotten ahead of the regulators, and the regulators have got to get ahead of the technology,” Shelby said. “That’s going to be a big challenge down the road. Otherwise we could have more of this.”

Dodd said he asked Sen. Jack Reed (D-R.I.), the chairman of the relevant subcommittee, to spearhead the Senate’s examination.

Dodd also sought to use the bizarre market behavior as another reason why Congress must pass regulatory reform next week, which he said will create an “early warning system.”

“We’re trying to deal with systemic risk,” he said. “We need to get in place our bill, have the president sign it, so we have the tools to protect our economy from these kinds of events

Probably no one is more hell bent on leaving office with financial reform finalized and enacted into law  than Senator Chris Dodd.  Early on Dodd declined taking over Senator Kennedy’s committees so he could aggressively work towards finance reform.  The bizarre freefall in the market on Wednesday has not been fully explained yet.  At first finance experts thought it was the riots in Greece.  Then they attributed the fall to human error, thinking someone had typed on a B (billion) instead of M (million).  Then came the computer glitch theory.  So  far no definitive reason has been given for the Dow’s  drop in 1000 points.  It regained more than600 of those points 15 minutes later.  However, it was one hell of a drop that set off national panic and the markets have not yet recovered. 

Chris Dodd is determinted to seek reasons and to fix the situation so it can’t happen again.    Meanwhile, some of the pundits are advising selling equities.  No one is saying where people should put their investments, however.  Those with 401ks simply don’t have that many options open to them, as a rule. 

It is time for the naysayers, may of whom simply don’t have the knowledge to make complex financial recommendations, to shut up.  It is time to put partisan politics aside, for the good of us all.  Macro-economics is a complicated subject and one that after a point, lends itself simply to theory.  Let’s bring in all the experts and disregard those who are experts only in their own minds.

5 Thoughts to “Dodd pledges hearings into market plunge”

  1. marinm

    I know that with the statement above I’m not qualified to have an opinion (as only the elite can have an opinion) even though I’m being asked to pay for it but the last time hearings were sought because of something Wall St. did — those hearings were cancelled.

    Reference http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/

    And the now famous AT&T slide (#6) found at http://www.scribd.com/doc/30954522/FORTUNE-ATT-Power-Point showing AT&Ts cost of insuring 283K current employees and some unspecified number of retirees for 4.7 billion/year. Or, paying the healthcare fine by dumping everyone onto the exchange and paying the government 600M/year.

    We’re trusting that those people that developed HCR will be smart enough to ‘fix’ finance reform.


  2. I don’t know what will happen. That was sure a nose dive.

  3. Intesesting…the money seems to not be attracting attention.

    It seems rather critical to me.

  4. Formerly Anonymous

    Like marinm, I don’t consider myself an expert, although I think I am probably “Smarter than the average bear” when it comes to the markets. But since nobody else wants to step in here, I’ll go ahead.

    I don’t see Dodd’s hearings doing much because ultimately there isn’t a problem with the equity markets. They are acting fairly rationally, albeit in a chaotic fashion. The equity markets are reacting to events in the credit markets, and the credit markets are being driven by the sovereign debt crisis.

    The credit markets have lost confidence that the political leaders of the heavily indebted nations have the political will to enact the austerity measures needed to fix their problems. Look at the nearly $1 trillion bailout the EU enacted. It shored up the Euro…for less than a week. The Euro fell through it’s support level at $1.25 and many think the next support level is it’s introduction value of $1.16. Why? Because as people examined the EU/IMF bill they discovered that it has little in it to prevent Greece and the other pigs from walking away from their austerity plans when they start to hurt and continue to spend Other People’s Money.

    Greece is viewed by many as the canary in the coal mine for Spain & Portugal and they are the warm up act for the US, which a few years further down the road.

    Until there is serious political leadership in the EU and the US, this is going to continue to get worse. In the short term, it’s great for the dollar, since the Euro is falling faster than the dollar, but what little patience the credit markets have for these games will be exhausted by the time we get our chance to be Greece.

    About the only chance I see of avoiding a major crisis would be a Shock and Awe strategy. Not a money bomb like the EU/IMF attempted but a serious, preemptive austerity plan that included significant spending cuts, tax increases and major entitlement program reform. I can’t see it happening in the current political environment, but if it did, there’s a chance it would cause people to rethink the linkage between the pigs and the US and boost confidence that the US will extract it’s way our debt crisis.

    Note: This isn’t meant as a criticism of President Obama or of the current Congress. I’m just pointing out that the political will doesn’t exist. Can anyone seriously see the Democrats signing up for hundreds of billions of dollars in spending cuts and trillions of dollars in cuts to future outlays in Social Security? Similarly, can anyone seriously see the Republicans agreeing to hundreds of billions of dollars in tax increases? I can’t, and I think most people who’ve looked at the problem agree.

    And that’s the root of the problem. Fix it and the equity markets will fix themselves.

    1. Thanks. I need to digest what you have written when I deprogram from working.

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