Today, your legislators are hard at work crafting some form of financial reform legislation. ABC News' Sunlen Miller reports today that President Obama says he's "absolutely confident that the bill that emerges is going to be a bill that prevents bailouts." On the other hand, Senate Minority leader Mitch McConnell (R-Ky.) says that the bill "actually guarantees future bailouts of Wall Street banks...endless taxpayer bailouts of Wall Street banks." Nancy Pelosi and Harry Reid back the President's contention.
And here's today's Washington Post, documenting how President Obama is rejecting "GOP claim that financial reform bill would encourage bailouts." Same quotes from Obama and McConnell, with a passel of Democratic lawmakers showing up again to inveigh against the notion that the reform measure encourages bailouts. Two big festivals of this-guy-said-and-then-that-guy-said stenography.
But, hey! It sure sounds like the first thing (the bill prevents future bailouts) is the exact opposite of the second thing (the bill encourages future bailouts), doesn't it? So, you'd probably want to know which one is, you know, correct. Unfortunately, there's nothing even remotely evaluative in these pieces. You're left with a bunch of legislators, criticizing each other, making a bunch of unsubstantiated claims. Maybe everyone forgot that this happens every day in politics, somehow?
Anyway, as it turns out, there are actual points of clarity to be had here. For example, how about the part where McConnell's statement about permanent and endless taxpayer bailouts isn't a contention that stems from a furtive study of the legislation, but rather originates from a talking-point strategy memo from Frank Luntz, who teaches the GOP what words to use to make voters upset and congenitally confused? Per Pat Garofalo, it's true, it's true:
Republicans, following a strategy outlined by pollster Frank Luntz, have taken to consistently characterizing the Democrats' reform effort as linked to "the Big Bank Bailout," even though the two aren't remotely connected.
John Harwood seems to understand what is going on, though! Here he is on MSNBC today, describing the GOP's contention that the reform bill fosters future bailouts to be "a little silly."
HARWOOD: Honestly, Senator McConnell's argument is a little silly when you look at the text of the bill. The bill itself does authorize a fund, which is paid for by financial institutions for the sole purpose of shutting down -- closing down -- firms that are failing, that might pose some systemic risk. And you have the funds there in the bill to make sure that's done smoothly, with no disruption to the economy. That's the argument that Tim Geithner made in the White House Briefing Room today.
The other unfortunate thing for Senator McConnell is that the argument tracks the political memo that was put out by pollster Frank Luntz a while ago. So it's a difficult argument for Republicans to sustain on the facts, and also appearance-wise, it makes it look like they are parroting the remarks of one of their pollsters. Not a great place to be.
Yes, somehow, Harwood managed to penetrate this dark mystery, using only widely reported facts, available to everyone!
Garofalo continues in this vein, using that which can be known about the bill to report out whether or not it encourages bailouts:
For starters, neither the financial reform bill passed by the House of Representatives last year nor the one moving through the Senate makes bailouts "permanent." In fact, both include a resolution authority, aimed at unwinding systemically risky financial firms, and funded by assessments on the biggest firms themselves. It lays out a process for identifying whether a firm is too systemically entangled for traditional bankruptcy and, if so, putting it into an FDIC-style receivership. It is the opposite of the ad hoc approach to which the government was limited in 2008.
Barney Frank, on these pages, puts it in even starker terms:
The bill creates a Financial Stability Oversight Board that will monitor the activities and practices of large financial institutions, but if they run into trouble the Board becomes a death panel. If a Wall Street bank or investment bank begins to fail, threatening the safety of the financial system, it will be put to death. End of story. Shareholders are wiped out, unsecured creditors are out of luck, management and every employee that is not required to shut down the company is fired. And even secured creditors may be required to take haircuts. The industry pays into a fund to put the institution to death, and this fund is only used to protect the system and our economy when the bank fails.
And hey, there was also that time Mitch McConnell met with "25 Wall Street executives and hedge fund managers," where he received his marching orders on how to criticize regulatory reform. I'm pretty sure they did not tell him, "We are sincerely worried that the American taxpayers may have to bail us out again for our terrible business practices, which by the way we'd like to continue."
So, there you have it. There are two sides to every story, and often, one of them doesn't make a lick of sense.
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