Hedge-funder says Dodd-Frank entrenches crony capitalism 

From the Millken Institute conference in Los Angeles, the New York Times’s Andrew Ross Sorkin has an interesting blogpost on responses to the Dodd-Frank Act passed in 2010. After quoting the CEO of Moody’s saying the law is “probably not workable,” the Treasury Department’s overseer of the AIG bailout saying that “it’s got deep flaws” and the chairman of Allstate saying it “creates more uncertainty than certainty,” he then quotes Ken Griffin of Citadel Investment Group really laying into it.

“Mr. Griffin has a very different take on the matter: To him, the government ‘literally will come in and say that we are going to liquidate your institution without you having had filed for bankruptcy. It’s an involuntary proceeding,’ he said, noting that there will be ‘little in the way judicial oversight.’

“He continued: ‘The F.D.I.C. then says here are the creditors who we are going to protect out of the gate and make whole to one degree or another, and then here are the creditors who are not going to make whole out of the gate.’

“What does all this mean? According to Mr. Griffin, ‘this means that companies that are connected to Washington, that curry political favor, will be favored at the expense of companies that do not have their business model revolve around appeasing politicians and making campaign contributions.’”

Griffin’s conclusion is that Dodd-Frank is “going to deeply entrench crony capitalism into the very fabric of our financial system, which I am terrified about.”

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Michael Barone

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