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How Will the Financial Services Bill Affect You and Your Tax Dollars?

The Obama Administration is touting the Restoring American Financial Stability Act of 2010 as a populist measure that will be embraced by the American people and will make them forget the health care mess. But this latest expansion of government power is just more of the same, restricting personal choice and putting government in charge. This is what it will do to you:

1) You Will Pay Higher Costs and There Will Be Less Jobs

  • Higher Cost of Living: The Restoring American Financial Stability Act of 2010 by Sen. Chris Dodd (D-CT) will raise costs across the economy. Americans will suffer higher fees, interest rates and closing costs, and lower rates on savings accounts. Customers with marginal credit scores will have reduced opportunities for credit.
  • Jobs Lost: If this bill passes, financial operations could likely move to cities with more favorable regulatory conditions like London or Hong Kong. That would reportedly move hundreds of thousands of financial services jobs overseas, in addition to the restaurateurs, dry cleaners, etc. that would go out of business without those people there to serve.

2) You Will Have Less Credit and Banking Options

  • Fewer Ways to Finance Things You Want: Because the definition of a financial institution is so broad in the bill, any company that holds a line of credit will be affectedincluding companies like Dell, Home Depot, and Wal-Mart. So getting your new LCD TV now and paying it off over two years may no longer be an option.
  • Fewer Financial Products: The consumer protection agency created in the bill would limit the types of products that can be offered to customers. This means that consumers and small businesses have fewer options for loans and investments, and many will be shut out of the system entirely.
  • Regulations Stifle Innovation: New financial products are created all the time, but the new onslaught of regulations threatens that trend. For example, if this bill had passed a decade ago, debit cards, PayPal, or the Starbucks card may have never been created.
  • Less Competition Among Financial Institutions: Because the bill allows financial institutions deemed important to the economy to be singled out for special treatment, those institutions will enjoy an implicit guarantee against failure. The ultimate result? Less competition from smaller banks, and greater unjustified risk-taking by those receiving guarantees.

3) You Will Not Be Protected From Another Credit Crisis

  • No Real Reform: Dodds plan neglects to address the structural problems within our financial system, and instead showers the broken system with more money and smothers the banks with more regulations.
  • No Less Risk: The bill doesnt encourage financial institutions to be less risky. If anything, it will encourage some firms to take more risks because their creditors could be bailed out should they fail, and it stops a modern economy from doing what it should: shift risk around.
  • No Better Foresight: Under the Dodd bill, the people charged with regulating the financial industry are the same ones who missed the last credit crisis. So, short of giving them psychic powers, this bill will not prevent another crisis.

4) Your Tax Money (and Possibly Your Bank Fees) Will Go to More Bailouts

  • Perpetual Too Big to Fail Mentality: The government picks winners and losers in the Dodd bill by establishing a system where certain large financial institutions are put on a bailout list where the federal government is likely to bail them out should they ever need it.
  • More Harmful Bailouts: The system doesn’t work if companies are protected from failure. No matter what these financial institutions do or how irresponsibly they act, they will get a free ride, and their creditors like Deutche Bank and Credit Suisse will too.

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