Today in Washington, D.C. - April 15, 2010: Geithner, Other Experts Identify Bailout Problems In Dems' Financial Regulation Bill

Yesterday, we missed posting on activity in Washington, D.C.. Today, we incorporated some of the issues yesterday as well as looking at today. Yesterday, both houses of Congress observed a moment of silence for the president of Poland and all the Polish officials killed in a plane crash over the weekend. The Senate resumed consideration of extending unemployment benefits (H.R. 4851) that expired at the end of March by using deficit spending. The Senate voted 60-40 to waive pay-as-you-go requirements for the bill. Prior to that, the Senate voted 51-46 to reject an amendment from Sen. Tom Coburn (R-OK) to rescind $20 billion in unobligated federal funds to pay for the bill.

Today, following yesterdays votes, the Senate again resumed consideration of H.R. 4851. Votes on amendments are expected today. Last night, Senate Majority Leader Harry Reid filed cloture on the bill. This morning, Attorney General Eric Holder began testimony before the Senate Judiciary Committee which are being broadcast on CSPAN.org.

Americans agree that it’s imperative to prevent a repeat of what happened during the financial crisis of 2008 and that taxpayers should not again be expected to bail out Wall Street for corporations’ own mistakes. But the bill that Senate Democrats have put forward to address this issue actually allows for perpetual bailouts, something that is simply unacceptable to Senate Republicans.

Now it is noted that there is a law in the White House bill to regulated and bailout financial institutions -- instead of eliminating taxpayer bailouts of Wall Street, the bill actually creates a fund that would perpetuate them. As the AP explains in a fact check piece today, “The GOP’s position was once raised by none other than Obama’s own treasury secretary, Timothy Geithner, and by some liberal critics of the Democrats’ proposed overhaul of Wall Street oversight — as well as by nonpartisan analysts. . . . In October, Geithner made a similar argument to House lawmakers, saying that instead of creating a fund in advance, the costs of liquidating a large firm should be assessed to other large financial institutions after the FDIC dismantles a company. ‘A standing fund would create expectations that the government would step in to protect shareholders and creditors from losses,’ he said then.”

Although Democrats were quick to defend the bill, it seems the White House and Democrat leaders are more interested in the issue as a partisan cudgel than in finding real bipartisan solutions. In March, The Wall Street Journal pointed out, “White House spokesman Robert Gibbs said, ‘We are not going to compromise on what we believe represents a very strong piece of legislation.’” And Politico reported, “Some Democrats… argue that the White House would be better off — politically, anyway — if Democrats could hit the campaign trail in the fall and blame Wall Street-friendly Republicans for blocking the reform bill.” Even The Washington Post editors see the partisanship at work. They write today, “Now the White House, convinced that it has a winning issue -- go ahead, Republicans, side with Wall Street if you dare -- is discouraging Democratic senators from working with any Republicans who might still be so inclined.”

In fact, the White House actually undermined a bipartisan deal between Sen. Blanche Lincoln (D-AR) and Saxby Chambliss (R-GA) on derivatives oversight, according to The Wall Street Journal. And earlier in the process, Sen. Bob Corker (R-TN) pointed out that he felt Senate Banking Committee Chairman Chris Dodd (D-CT) “was pressured by others in his party to cut off the negotiations.”

Speaking to reporters yesterday, Sen. Richard Shelby (R-AL), ranking Republican on the Banking Committee, summed up the situation: “I think that the Dodd bill, as Senator McConnell just alluded to, would enshrine the too-big-to-fail. I’ve pointed this out from the beginning, after the markup, and will continue to do this. But we can get a good bill, if they will meet us halfway. And they haven’t yet. . . . But we’re not open to a bad bill, because that would be continuing what we’re doing. It will not be in the taxpayers’ interests. It will not create jobs. It will not be in the people’s interest, period.”

Bloomberg News reported yesterday, “Federal Reserve Bank of Richmond President Jeffrey Lacker said proposals in the House and Senate will not stop banks from becoming ‘too big to fail.’ The legislation ‘just perpetuates the dynamic that gave us “too big to fail” to begin with.’”

In addition, the AP story reported that “McConnell also maintains that the Democrats’ bill would sustain a cadre of financial behemoths considered ‘too big to fail’ by singling them out for special attention by a Financial Stability Oversight Council. ‘So a new government board based in Washington would determine which institutions would qualify for special treatment — giving unaccountable bureaucrats and self-appointed wise men in Washington even more power to protect, promote or punish companies at whim,’ he said. Simon Johnson, former chief economist for the International Monetary Fund and a professor at the Massachusetts Institute of Technology, and others have argued from the left that Obama and the Democrats have done nothing to get rid of ‘too big to fail’ firms.”

As Sen. McConnell said today, “Republicans and Democrats alike believe that the flaws in the Democrat bill, flaws that would allow taxpayer dollars to bailout Wall Street banks, can and should be corrected.” But this can’t happen if Democrats decide on a take-it-or-leave-it approach to the bill and choose to have a political issue instead of a solution that protects taxpayers. For the Democrats, it is business as usual,ignoring a majority of American's concerns over bailout and many other areas of concern.

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Tags: Washington, D.C., US Senate, bank bailout, unemployment benefits
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