Former Sen. Chris Dodd, D-Conn., offered insight into the development of his signature financial reform bill Friday at the Jack Morton Auditorium, saying his job was not to punish bad investors but to create a totally new financial structure.
Dodd described the two-year process of trying to fix a broken system that he said enabled the 2008 economic crisis. The former senator, who did not run for re-election in 2010, said he was tasked with creating a new system that would prevent future collapses.
“The need for serious financial reform seemed clear. My job was not to punish those who created the mess. Our job was to reform the architecture that was almost 100 years old,” Dodd said. “We needed to build a system that would help avoid economic crises when possible and to minimize them when they occur.”
Dodd headlined the GW Law School’s annual symposium on economic and financial law, which focused this year on the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
President Barack Obama signed the legislation into law in July, and analysts considered it the most comprehensive financial reform since the Great Depression.
The bill, which included greater federal oversight for financial companies and created a consumer protection panel, was one of the Democrats’ signature achievements during the 111th Congress.
“To me, proving that Congress could grapple with big issues, maybe not with perfection, but to come up with some good answers and creative ideas that nobody ever thought could get done, carried the day in a very acrimonious environment,” Dodd said after the event. Dodd, who spoke for about an hour, discussed the need for strong regulation amid a “wild west” atmosphere on Wall Street.
The debate, he said, was also intensified because of the lack of financial literacy in Congress.
“Everyone thinks they should be secretary of defense or secretary of state or the president. But a damn few ever think they should be secretary of treasury or serve on the Federal Reserve Board,” Dodd said.
Dodd defended the federal government’s bailout of the country’s financial system in 2008. He described a dramatic meeting with then Secretary of Treasury Henry Paulson, Federal Reserve Chairman Ben Bernanke and members of Congress in 2008 before enacting the bailout.
“What was said in that room that evening I equate with the political and economic equivalent of almost a 9/11 moment. The Federal Reserve chairman announced that unless we acted within a matter of days, the entire financial system in the entire world could melt down.”
Dodd spoke as part of an all-day conference hosted by the law school.
“Conferences like this are tremendously valuable. Nothing is more dangerous than a member of Congress thinking he’s crafted perfection,” said Lawrence Mitchell, executive director of the GW Law School’s Center for Law, Economics and Finance, which co-sponsored the event. “We need conferences to assess the practicalities of legislation.”