During the overheated debate on health insurance reform, the Republicans stated the bill would create death panels that would kill grandma. They made it up, of course, but now they are ignoring a key aspect of the House and Senate Wall Street reform bill proposed by Democrats: death panels to shut down failing financial institutions.
In fact, yesterday, Senator McConnell took to the Senate floor to say the following: "We cannot allow endless taxpayer-funded bailouts for big Wall Street banks,'' McConnell said. "The way to solve this problem is to let the people who make the mistakes pay for them. We won't solve this problem until the biggest banks are allowed to fail.''
The House bill does just that. 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.
Republicans just don't want to believe it: Under the Democratic plan, the taxpayer is not put on the hook. Not now, not ever. Taxpayer bailouts, like the one President Bush authorized, are over.
Senator McConnell and every Republican member of the House should know that the cost of doing nothing is more bailouts. Republicans had every opportunity during President Bush's two terms to regulate derivatives, rein in subprime lending, end "too big to fail" financial institutions and restrict bank practices. Unfortunately for the American people, Republicans failed time and time again. The result: President Bush's bailouts.
In December, the House passed the Wall Street Reform and Consumer Protection Act, legislation that will protect Main Street from the worst of Wall Street abuses after years of non-existent regulation and oversight by the Bush Administration and Congressional Republicans. Details on how the Democrats end bailouts and protect taxpayers can be found here.