Chris Dodd at the Middlesex chamber breakfast: “As rich and as vibrant as the English language is, there are not adequate words to describe…my gratitude to the people of the state.”

November 24, 2010 · Posted in The Capitol · Comment 

Chris Dodd was one of first marquee speakers at the Middlesex County Chamber of Commerce’s regular breakfast meetings many years ago.

So it was only fitting that the lame-duck senator make an appearance before the group this morning, as his long political career comes to a close.

A wistful Dodd told the crowd in a ballroom at the Crowne Plaza hotel in Cromwell that he stayed up watching the Giants game last night and that his oldest daughter has won a part in the “Nutcracker.” And while he didn’t reveal his post-Senate plans, he did express enormous gratitude toward the people of Connecticut for giving him the opportunity to serve.

The Democrat who has served in the U.S. Senate since 1980 also weighed in on the election, which marked the first time in almost 40 years that he’s watched from the bleachers. He decried hyper-partisanship in Washington and reflected on the influence of money in campaigns.

“I don’t fault anyone who has the personal wealth to engage in  the political life of our country,” Dodd said, in what was perhaps a veiled allusion to his one-time opponent, Republican Linda McMahon, who sunk $ 50 million of her own fortune into her losing bid for a Senate seat.

“When I watched this last campaign cycle and the millions being spent, most of it on negative advertising, I worried about what it [meant] for our nation,” he said. He decried the fact that “more dollars are spent to…demonize people rather than to talk about the facts.”


Capitol Watch

Chris Dodd, Dick Blumenthal, Nancy Wyman, John Rowland Attend Retirement Party For Channel 30′s Tom Monahan

November 23, 2010 · Posted in The Capitol · Comment 

Both Republicans and Democrats came out for the retirement party of Channel 30′s chief political reporter Tom Monahan, who has been covering Connecticut for the past 45 years.

The crowd included U.S. Sen. Christopher J. Dodd, U.S. Senator-elect Dick Blumenthal, Lt. Governor-elect Nancy Wyman, Attorney General-elect George Jepsen, and former Gov. John G. Rowland, among others.

The Hartford Courant’s Java column has the details at,0,3956099.column

Capitol Watch

Twitter trouble for Sen. Dodd

November 22, 2010 · Posted in The Capitol · Comment 

Chris Dodd’s Twitter feed, like those of most politicians, contains a mix of PR statements and generic observations.

So his 2,701 followers were no doubt surprised when they saw this tweet this morning from the esteemed Senator from Connecticut.

 Senator Chris DoddSenChrisDodd U love torturing me w this [expletive]

Minutes later came the follow-up tweet from Dodd’s staff: Apologies to Dodd’s followers, last tweet was not from Chris Dodd.

UPDATE – Dodd’s staff released the following statement moments ago: “Due to a technical mistake, a message was inadvertently sent from Senator Dodd’s twitter account. Senator Dodd did not send the message. We have corrected the situation and apologize to his followers for the mistake and inappropriate language used in the message.”

The tweet was hastily removed, but that didn’t stop others from chiming in:

michellemalkin Was this meant for Angelo Mozilo? RT @MPOTheHill: Whoops RT @SenChrisDodd: U love torturing me w this…

(Malkin, by the way, preserved a screen grab of the offending tweet on her blog before it was taken down.)

daveweigel Members of all parties can agree that no one should torture Chris Dodd with [expletive] ventions
brianbeutlerSo did David Vitter steal Chris Dodd‘s Blackberry?  



Capitol Watch

Both Dodd and Frank Call on Admin to Use Powers of Dodd-Frank

November 19, 2010 · Posted in The Capitol · Comment 

DDay has a really important post that-along with a great interview with Brad Miller-includes a letter from Miller and other members of Congress, urging the Financial Stability Oversight Council to take action to prevent the foreclosure fraud problem from becoming a systemic crisis. The letter reminds the FSOC that Dodd-Frank gives them the power to avoid a systemic crisis.

An important purpose of the Dodd-Frank Act is to identify risks to the financial system as early as possible, so that regulators can take corrective action or minimize the disruption to the financial system that results from the insolvency of systemically significant financial companies. It is also a purpose of the Act to make risk to our nation’s financial system transparent in order to restore the confidence of the American people in the financial system and in their government.

And lists three things the FSOC should do to prevent the foreclosure fraud problem from becoming a systemic crisis:

  1. Examine a representative sample of loans to see whether they comply with legal requirements and pooling and servicing agreements.
  2. Determine whether the second liens servicers have on loans have led them to act contrary to the interests of the first lien holders.
  3. Require big banks to divest themselves of servicing businesses.

House Financial Services Committee Chair Barney Frank is one of the first ten people to sign this letter.

Put together with Senate Banking Committee Chair Chris Dodd’s call on Tim Geithner to consider how the FSOC can mitigate the risks of this crisis, you’ve got both Chairmen of the relevant committees urging the FSOC to do something about the potential systemic risk of this crisis. You’ve got Dodd and Frank, the two guys with their name on the financial reform bill, calling on the Administration to use the authority granted under Dodd-Frank to prevent another meltdown.

And thus far?

Crickets. From both the Administration and the media.

Related posts:

  1. Chris Dodd Uses Hearing to Call on Geithner to Do His Job
  2. Remember the Stress Tests?
  3. Foreclosure Crisis May Well Be Catastrophic In Any Case


Dodd calls for a new national council on children

November 18, 2010 · Posted in The Capitol · Comment 

U.S. Sen. Chris Dodd is calling for a new, national council to focus on improving the lot of the nation’s chuldren.

The National Council on Children would provide an annual assessment of the state of the American child and make recommendations to Congress on policies effecting children’s health, education and overall well-being.

“This subcommittee has provided an important forum for our country’s elected leaders and children advocates to focus on the needs of our children. And it has played a vital role, shedding light on the struggles our nation’s children face,” Dodd said ina  press release. “What we have learned is that our children are in crisis. It is critical that we create a new national council on children to closely examine the needs of children and identify solutions to improve their lives.”

He’s being joined by Se. Bob Casey of Pennsylvania, who said such a council could provide a “road map to ensure that the current generation of young Americans has as many opportunities to succeed as possible.”

Dodd today wrapped up the last of four hearings on the state of the American child, which examined virtually every aspect of the lives of Americans under 18 years of age. Throughout his long career in the U.S. Senate, Dodd has been a champion of children’s issues; he founded the chamber’s Children’s Caucus in 1983.



Capitol Watch

Chris Dodd Uses Hearing to Call on Geithner to Do His Job

November 17, 2010 · Posted in The Capitol · Comment 

Chris Dodd didn’t have many questions in yesterday’s hearing on the foreclosure crisis. But he did use the opportunity to call on Tim Geithner to convene the Financial Stability Oversight Council to prevent this crisis from blowing up the economy.

Dodd: Attorney General Miller, at the outset of my opening comments I talked about the importance of getting the, this Financial Stability [Oversight] Council that we established in the Financial Reform Bill to anticipate systemic risk and to collectively work as a body chaired by the Secretary of the Treasury, along with the FDIC and the OCC-there are ten members of that, an independent member and five others that are part of it. This seems to me like a classic example-one that we did not anticipate necessarily when we drafted the legislation, but exactly, we are in a crisis with this. Now you can argue that it’s not yet a systemic crisis that poses the kind of risk we saw in the Fall of 08, but no one can argue that we’re not in the middle of a crisis. Now the idea of this, of course, was to minimize crises so they don’t grow into a large, systemic crisis. Have you had any contact with the Secretary of Treasury? Or is there any communication going on between the Attorney Generals and this Council or the Chairman of it, the Secretary of the Treasury, or their office, to begin to talk about what the role of the federal government might be in formulating an answer to all of this?

Miller: We haven’t had any contact with the Council. We have had repeated contact with the Department of the Treasury, with Assistant Secretary Michael Barr and his staff. We’ve developed a terrific ongoing relationship with them. We talk about these issues and try and help and support each other on these issues. So we’ve had a lot of discussions with Treasury but not with that particular Council.

Dodd: Again I saw [mumble] privately with Senator Warner and others may, Senator Merkley has a similar thought. I’m going to use this forum here, obviously in a very public setting, to urge the Secretary of Treasury and others to convene that Council to begin to work with you and others, so there is a role here to examine this question in seeking broad solutions. So my hope is they’ll hear that request to pick up that obligation that we laid out in that legislation.

You know, when the Chairman of the Senate Banking Community has to use a forum like this to try to remind the Secretary of Treasury of his obligation under Dodd-Frank, it does not inspire a lot of confidence.

Related posts:

  1. How a Previously Qualified Elizabeth Warren became Unqualified, According to a Previously Progressive Chris Dodd
  2. Liveblog: Senate Banking Committee on Foreclosure Fraud
  3. Remember the Stress Tests?


Chris Dodd congratulates Blumenthal on U.S. Senate win

November 3, 2010 · Posted in The Capitol · Comment 

Early Wednesday evening, U.S. Sen. Christopher Dodd sent out a press release congratulating the man who will replace him, Richard Blumenthal, on his victory last night.


“Having known Dick for over 30 years, I have no doubts that he will be an excellent United States Senator and will represent the people and interests of Connecticut with the same vigor and passion that we have seen from him as our Attorney General,” Dodd said in the statement issued just after 6:30 p.m.


“It has been a great privilege and honor to represent Connecticut for the last 36 years, and I will forever be grateful for this opportunity. Our state is represented in Washington by a powerful and influential delegation that I am confident will continue to deliver for the people of Connecticut.  Senator-elect Blumenthal will be a strong addition to our delegation and I look forward to working with him and helping in any way I can as he transitions into his role as our next United States Senator,” he said.


Capitol Watch

McMahon’s Hail Mary: Chris Dodd

October 20, 2010 · Posted in The Capitol · Comment 

Former WWE CEO Linda McMahon (R) is up with a new ad seeking to change the narrative in the Connecticut Senate race by tying Democrat Richard Blumenthal to Sen. Chris Dodd (D) and his Countrywide Financial scandal.

McMahon has never mentioned Dodd in an ad since he quit the race and this 60-second spot is clearly an attempt to tar Blumenthal in the final days of the race by reminding people of Dodd.

“We know about Chris Dodd and his sweetheart deals with Countrywide, but did you know about Dick Blumenthal?” the ad’s narrator says. “Blumenthal cut a deal with Countrywide that let the mortgage giant off the hook for billions. A deal that raided the retirement funds of teachers, fireman, policemen and state employees.”

If there is one thing you can say about McMahon, it’s that she’s gutsy. The veracity of the Countrywide Financial charge, as it applies to Blumenthal, has been questioned in local media.

She has also sought to deliver a knockout blow by airing a hard hitting ad on Blumenthal lying about serving in Vietnam.

McMahon, who reported having spent $ 41.5 million the race so far, needs a game changer at this point. Recent polling has shown Blumenthal beginning to open up a near double-digit lead.

Hotline On Call

Dodd Frank, Bubble Laws, and Quack Corporate Governance

October 1, 2010 · Posted in The Capitol · Comment

Dodd Frank, Bubble Laws, and Quack Corporate Governance

September 29, 2010 · Posted in The Capitol · Comment 

My colleague Lynn Stout and I are co-panelists today on a program here at the UCLA School of Law on Onward and Upward or Over the Cliff? The Future of Financial Reform and the U.S. Economy. My remarks will be based on my recent paper Dodd-Frank: Quack Federal Corporate Governance Round II. A written version of my remarks follows. Supporting citations can be found in the main paper.

Our economy suffered through two major asset bubbles during the first decade of this century: at the start and housing at the end. Both were followed by what we might call “bubble laws.”

During a bubble people are lulled into inaction by the seemingly ever-rising value of their portfolios.

At the same time, however, the stage is being set for a post-bubble burst of regulation.

In the euphoria associated with a bubble, regulators and private gatekeepers tend to let their guard down, so potential fraudsters see an explosion of opportunities, and investors become both more greedy and trusting.

The net effect is a boom in fraud during bubbles, especially towards the end, when everybody is trying to keep the music going.

When the bubble inevitably bursts, investigators reviewing the rubble begin to turn up evidence of speculative excess and even outright rampant fraud.  Investors burnt by losses from the breaking of the bubble and outraged by evidence of misconduct by corporate insiders and financial bigwigs create populist pressure for new regulation.

Given the upswing in populist anger and accompanying intense public pressure for action that follows the bursting of a major asset bubble, these periods offer “windows of opportunity to well-positioned policy entrepreneurs to market their preferred, ready-made solutions when there is little time for reflective deliberation.”

Our UCLA colleague Stuart Banner contends that deep-seated popular suspicion of speculation comes in bad financial times to dominate otherwise popular support for markets, resulting in the expansion of regulation. Financial exigencies embolden critics of markets to push their regulatory agenda. They are able to play on the strand of popular opinion that is hostile to speculation and markets because the general public is more amenable to regulation after experiencing financial losses.

As a result, bubble laws often “impose regulation that penalizes or outlaws potentially useful devices and practices and more generally discourages risk-taking by punishing negative results and reducing the rewards for success.”

We saw this in 2002 when Congress passed Sarbanes-Oxley. It contained a number of provisions that Yale law professor Roberta Romano apty called “quack corporate governance.”

SOX’s provisions created significant new costs that have had a deleterious effect on the economy and the capital markets. Several studies report that the increased costs associated with SOX are one reason for an increase in the number of public corporations deciding to go private.  Other studies found that the costs associated with SOX negatively impacted foreign firms and encouraged them to delist from U.S. capital markets. High profile reports from groups like the Paulson Commission and the US Chamber of Commerce find that SOX has contributed significantly to a decline in the competitiveness of US Capital markets.

In a recent paper, which you can get at my blog, I identify 8 characteristics of “quack” corporate governance rules:

1.     It is a bubble law, enacted in response to a major negative economic event.

2.     It is enacted in a crisis environment.

3.     It was a response to a populist backlash against corporations and/or markets.

4.     It is adopted at the federal rather than state level.

5.     It transfers power from the states to the federal government.

6.     Interest groups that are strong at the federal level but weak at the Delaware level support it.

7.     Typically, it is not a novel proposal, but rather a longstanding agenda item of some powerful interest group.

8.     The empirical evidence cited in support of the proposal is, at best, mixed and often shows the proposal to be unwise.

All of Dodd-Frank meets the first four criteria. As I argue in the paper, the corporate governance provisions each satisfy all or substantially all of the remaining criteria.

I focus in the paper on 6 key provisions of Dodd-Frank:

1.     Section 951’s so-called “say on pay” mandate, requiring periodic shareholder advisory votes on executive compensation.

2.     Section 952’s mandate that the compensation committees of reporting companies must be fully independent and that those committees be given certain specified oversight responsibilities.

3.     Section 953’s direction that the SEC require companies to provide additional disclosures with respect to executive compensation.

4.     Section 954’s expansion of SOX’s rules regarding clawbacks of executive compensation.

5.     Section 971’s affirmation that the SEC has authority to promulgate a so-called “shareholder access” rule pursuant to which shareholders would be allowed to use the company’s proxy statement to nominate candidates to the board of directors.

6.     Section 972’s requirement that companies disclose whether the same person holds both the CEO and Chairman of the Board positions and why they either do or do not do so.

Each of these meets the criteria for “quack” corporate governance. Each displaces state corporate law with new federal one-size-fits-all mandates. Each was a longstanding goal of some interest group that is powerful at the federal level but weak in Delaware. In particular, the most important of these provisions—say on pay, compensation committees, and proxy access—are key parts of the institutional investor agenda.

Time does not permit me to go into the merits of each of the six proposals.

Instead, let me use this opportunity to emphasize that that systemic flaws in the corporate governance of Main Street corporations were not a causal factor in the housing bubble, the bursting of that bubble, or the subsequent credit crunch. To the contrary, “[a] striking aspect of the stock market meltdown of 2008 is that it occurred despite the strengthening of U.S. corporate governance over the past few decades and a reorientation toward the promotion of shareholder value.”  The problem necessitating remedial action was the need to address the moral hazard inherent in the idea that some firms were too big to fail.

Even if flaws in the corporate governance of banks and financial institutions were a causal factor in the crisis that would not explain the form Dodd-Frank took. Banks have a number of characteristics that make their corporate governance problems radically different than those of nonfinancial firms.  Yet, the provisions of Dodd-Frank addressed herein regulate the corporate governance of all public corporations, whether they are in the financial industry or not.

Instead, Dodd-Frank’s corporate governance provisions were included in the legislation because key policy entrepreneurs were able to hijack the legislative process to advance a longstanding political agenda. Specifically, as I already noted, all the major governance provisions were strongly supported by activists in the institutional investor community, especially union and state and local pension funds, for whom such items as proxy access and say on pay were high priority agenda items.

It seems reasonable to assume that these same activist investors will be the shareholders most likely to make use of their new powers.  The interests of these activists, however, are likely to differ significantly from those of retail investors or even other institutions. Indeed, union and state and local pension funds are precisely the shareholders most likely to use their position to self-deal—i.e., to take a non-pro rata share of the firms assets and earnings—or to otherwise reap private benefits not shared with other investors.

SEC Commissioner Casey echoed these concerns in her dissent from the SEC’s adoption of proxy access:

I believe many [investor] activists will concede that their interests in proxy access do not lie solely in the ability to successfully place a nominee on a company’s board of directors; instead, the proxy access right is also an important means of obtaining leverage to seek outcomes outside of the boardroom that may otherwise not be achievable — outcomes that are often unrelated to shareholder value maximization. 

The proposition that Dodd-Frank’s corporate governance provisions were a sop to special interests is further confirmed by the odd disconnect between the internal logic of those provisions and the back story of the financial crisis. Consider, for example, the question of executive compensation. Regulators identified executive compensation schemes that focused bank managers on short-term returns to shareholders as a contributing factor almost from the outset of the financial crisis.  As was the case with almost all public U.S. corporations, banks and other financial institutions shifted in the 1990s to a much greater reliance on equity-based pay for performance compensation schemes.  The rationale for such schemes is that they align the risk preferences of managers and shareholders. Because managers typically hold less well-diversified portfolios than shareholders, having significant investments of both human and financial capital in their employers, they tend to be much more averse to firm specific risk than diversified investors would prefer.  Pay for performance compensation schemes that link managerial compensation to shareholder returns are designed to counteract that inherent bias against risk and thus align managerial risk preferences with those of shareholders.

As already noted, shareholder activists long have complained that these schemes provide pay without performance.  This was one of the corporate governance flaws Dodd-Frank was intended to address, most notably via say on pay.  The trouble, of course, is that shareholders and society do not have the same goals when it comes to executive pay. Society wants managers to be more risk averse. Shareholders want them to be less risk averse, for the reasons just discussed.  If say on pay and other shareholder empowerment provisions of Dodd-Frank succeed, manager and shareholder interests will be further aligned, which will encourage the former to undertake higher risks in the search for higher returns to shareholders.  Accordingly, “the shareholder-empowerment position appears self-contradictory, essentially amounting to the claim that we must give shareholders more power because managers left to the themselves have excessively focused on the shareholders’ interests.”

In sum, the shareholder empowerment measures adopted before the crisis did nothing to prevent it and may well have contributed to it.  The new provisions included in Dodd-Frank thus are unlikely to prevent another such crisis and may even increase the odds of some similar crisis induced by excessive risk taking.

What we have in Dodd-Frank thus is a bubble law designed to promote rent seeking by a powerful interest group, which in my book makes it a classic example of quack corporate governance.

Next Page »

  • Laptop ac adapters, keyboards, batteries, inverters, LCD screens at
  • National Business Furniture, Inc
  • Toshiba -
  • Save 10% for Orders Over $129 at