What this meant, practically speaking, is that no longer would this federal backstopping just be limited to regular commercial banks if they got into trouble. Now it could be extended to noncommercial banks, i.e. investment banks that were prone to taking wild risks with other people's money. The "backstopping" was also extended to insurance companies. So, Dodd is a guy who was instrumental, in a very quiet way, in the expansion of the too-big-to-fail crowd. It was his amendment.
And now he's in charge of the reform! -- and he balked at the idea of placing the Consumer Financial Protection Agency anywhere other than within the domain of the Federal Reserve. But now we have lived with the terrible consequences of that expansion of the corporate safety net so that it encompasses all of the too-big-to-fail institutions.
The problem here is that not only do members of Congress get big contributions from the banking industry, but that the administration is now populated by people who had high-level jobs on Wall Street at the time the financial crisis originated. And now they've been put in charge of policing their former companies! This goes one better than fox guarding henhouse. This is almost like putting the arsonist in charge of the fire department -- making him your fire chief.
All of the people who did not want to regulate the risky derivatives (that helped do us in) are now in positions of regulatory power: Larry Summers, Director of the White House's National Economic Council. Gary Gensler, head of Commodities Futures Trading. Timothy Geithner, Treasury Secretary all of them were on the scene, participating, allowing, and/or profiting from the extreme growth and risk-taking that brought us the crisis in the first place. Geithner, for instance, was running the New York Fed, countenancing all kinds of risks that were taken at Citigroup, which was under his purview. So now these guys who were on the scene of this disaster when it originated, and purposely allowed it to go forward, are in charge of making sure this financial disaster doesn't reoccur?! Foxes guarding the hen house. You just don't get a sense that they are really and truly reformers in the true sense of the word.
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