The Amerian Enterprise Institute's Kevin Hassett has a new Bloomberg News article up about how the Senate passage of the financial "reform" bill caused a plunge in the stock market:
Our feckless leaders, the modern-day gang that couldn't shoot straight, targeted their policy weapons at Wall Street but hit Main Street. Big financial firms such as JPMorgan Chase & Co. (down 3.9 percent) and Goldman Sachs Group Inc. (down 2.9 percent) fell roughly in proportion with the overall Dow Jones Industrial Average, which declined 3.6 percent on Dodd's big day. By contrast, some companies that actually sell things to people plummeted: Ford Motor Co., down 6.5 percent; Timberland Co., down 8.8 percent; Sears Holdings Corp., down 11 percent.
One "cause of market pessimism," Mr Hassett writes, "is the likely impact of Democrats' financial reform on the cost of doing business for nonfinancial firms":
the new rules will surely concentrate the financial industry into a few very large firms with significant market power. That will be good for the bottom lines of these firms while likely increasing the cost of financial services for everyone else.
The firms that are too big to fail will be able to hold borrowers hostage with high rates. This will make it harder for firms to borrow to invest in new plants and equipment -- the equivalent of a big interest-rate rise targeted at nonfinancial firms. Such an increase would never be considered by monetary policy makers at this tenuous stage of the economic recovery, but it just got through the U.S. Senate.
Thanks to reader-participant-content-co-creator-community member-watchdog S. for sending the link.