Cliff Asness and another partner at his hedge fund AQR, Aaron Brown, wrote an OpEd in the Wall Street Journal today about the Dodd Financial Reform Bill, which the Connecticut Senator proposed in March.
As always in Asness’s letters, there are a couple colourful lines criticising the Bill:
- The bill does not say whether “substantial positions” and “significant losses” are to be measured relative to the global economy, or the financial positions of you and your counterparty, or for that matter to the average humidity of a mid-summer afternoon in Cleveland.
- The bill is drafted so it can do anything. True, if this bill is enacted we doubt that federal agents will nab you if you accept a rain check from the car wash without registering.
The two lines actually do a great job of summing up what the entire piece is about: the Dodd bill’s dangerous generality (check out his version of the Volcker Rule to see what Asness means).
Regulators will likely start off reasonably. But soon they’ll be pressured to investigate all unpopular financial events, using their unlimited power to demand information… The Dodd Bill is perfectly designed to create the largest and most powerful crony system in history… and to select for, reward and enforce corruption.
The SEC is now investigating almost every single bank for the roles they played in the credit crisis. The outcomes should provide a good indication of whether or not their demanding information and investigating unpopular events are productive and worthwhile.
Now check out what Dodd’s Bill actually proposes –>