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Last night Democrats failed to get the 60 votes needed to invoke cloture on the motion to proceed to the Dodd bill by a vote of 57-41. Democrat Senator Ben Nelson voted no - wonder what he wishes for his vote? Also, Reid voted no as Majority leader which allows him to again submit the bill for cloture. After the vote, the liberal team ran out several young democrats who ranted about the Republicans not being willing to debate and calling cloture an arcane process. When in fact, the Democrats never allowed the Republicans to participate in the development of the Dodd financial regulation bill.
Immediately after last nights vote and his voting no on the bill, Reid re-filed cloture on the motion to proceed to the bill which would allow for yet another cloture vote. So, today at 4:30 pm ET, Senate Majority Leader Harry Reid will again force a cloture vote on proceeding to the Dodd bill --- though has nothing has changed about it.
Today, the ARRA News editor attended a Bloggers Briefing at Heritage Foundation and listened to House Financial Services Committee Member Rep. Ed Royce (R-CA) address Wall Street and the financial state of the country Sen. Chris Dodd's financial reform (bailout) bill. He detailed how the bill's "measures would subsidize financial institutions at expense of taxpayers":
- "Under the bill the Fed would be the primary regulator overseeing banks and bank holding companies with assets of more than $50 billion as well as any institution the newly created Financial Stability Oversight Council believes could pose a systemic risk to the financial system. Backstopping these firms will be a $50 billion bailout fund. Should $50 billion not be sufficient, the fund can issue virtually an unlimited amount of debt that "shall be treated as public debt transactions of the United States" (that is, paid for by the American taxpayers). The problem with this approach (beyond the potential taxpayer losses) is that it reinforces the existence of a too-big-to-fail industry."
- "However, institutionalizing instead of eliminating the too-big-to-fail problem will likely be the most damaging. The ultimate cost of this failure will be shouldered by our capital markets, and our financial system will be split between the haves (those with a taxpayer guaranty) and the have-nots (everyone else).
Those institutions labeled too-big-to-fail will see a significant competitive advantage over smaller firms. In fact, we have already seen evidence of this phenomenon. A recent study by the Center for Economic and Policy Research found that the too-big-to-fail doctrine has translated into a tangible subsidy for the 18 largest bank holding companies worth $34 billion per year and a 78 basis points lower cost of capital when compared to their smaller competitors."
- "Armed with the competitive advantage, these mammoth financial institutions will dominate the marketplace. This is precisely what happened with the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the original too-big-to-fail institutions. Fannie and Freddie wiped out any competition and formed a duopoly over the prime secondary mortgage market because they were perceived to be government-backed."
- "Another ill effect of creating a too-big-to-fail industry is the inextricable link established between big business and big government. Undoubtedly, favors will be doled out by both sides of this relationship. Again, Fannie and Freddie set a precedent on the subject. They were able to continue their reckless ways because they had enough allies in Congress willing to turn a blind eye to safety and soundness as long as the GSEs met their demands."
The New York Times writes today, “Senate Republicans, united in opposition to the Democrats’ legislation to tighten regulation of the financial system, voted on Monday to block the bill from reaching the floor for debate. . . . Republicans said they were intent on winning substantive changes to the bill and accused the Democrats of rushing the most far-reaching overhaul of the financial regulatory system since the Great Depression.” Senate Republican Leader Mitch McConnell said in his floor remarks this morning, “Last night, the Democrat Majority forced a vote on a bill that wasn’t ready for prime-time. We know this because every day, it seems, another one of its flaws comes to light.”
But it’s not just Republicans pointing out these flaws. In fact, Nebraska Democrat Ben Nelson voted with Republicans against moving to the bill and explained some of his objections to The Washington Post: “Nelson said he had opposed starting debate on the bill because he objected to consumer-protection provisions that could harm ‘Main Street businesses’ back home, including dentists, whose patients often borrow to finance major procedures that their insurance policies don't cover, and auto dealers.”
And according to the Daily Caller, “Sen. Mark Warner, the Virginia Democrat who has been closely involved in negotiations, said that concerns being raised by Republicans about potential bailouts of large financial institutions are legitimate. ‘There are parts that need to be tightened,’ Warner said, referring to the bill in the same manner as Sen. Richard Shelby, Alabama Republican and ranking member on the Senate Banking Committee.”
A New York Times story seems to confirm the concerns many have with this bill: “Far afield from Wall Street, the intense debate over the overhaul of financial regulations by Congress is attracting some unlikely but powerful players. More than 130 companies from the manufacturing, retail and service sectors have retained high-powered lobbyists to weigh in on, and often oppose, the regulatory system being debated this week in Washington, according to an analysis of lobbying records by The New York Times. The companies bear little resemblance to Goldman Sachs and the other Wall Street financial giants that have become the main targets of the legislation. The lobbying push by these other industries shows just how broadly the legislation could affect businesses.”
“While the legislation’s backers in Congress insist that most non-financial companies have little to worry about,” the NYT explains, “many of these businesses say they are deeply concerned that the sweeping provisions in the 1,400-page Senate bill, particularly the regulation of the derivatives market, the creation of a consumer protection board and rules on corporate government, could draw them in and affect their bottom lines.”
The Times lists just a few of the companies concerned about the broad reach of Banking Committee Chairman Chris Dodd’s bill: “Mars, the maker of M&Ms and Snickers, wants to make sure it can continue dabbling in the derivatives market to protect the price of sugar and chocolate for its candies. Harley-Davidson is worried that its dealer-financed loans to bikers will fall victim to new federal financing regulations. And eBay is concerned about possible restrictions on PayPal, a subsidiary, in moving money in the Internet marketplace.”
And there are more. Auto dealerships from 35 states are concerned they would be regulated as financial lending institutions. The popular insurance company for military families, USAA, is afraid the bill could harm its finances. And “some colleges and universities, for instance, say that the broad definition of financial companies would mean new regulations and, ultimately, greater costs on some types of student loans,” the NYT writes.
As identified by the Republican leadership, “Clearly, this bill isn’t finished. It falls short of our constituents’ demands to prevent future bailouts, and it’s expected to hurt America’s job creators at a time when we need jobs most. I mean, does anyone really believe that the people who make Harley Davidsons and Snickers bars are responsible for the financial crisis? Then why would we want to punish them in our effort to hold Wall Street accountable. These are just the kind of unintended consequences you get from rushing legislation.”
Democrats are bullying a flawed financial regulation bill and playing games with the public. They should stop holding political votes to generate headlines and instead continue bipartisan negotiations to produce a bill that ends taxpayer bailouts of firms that made bad decisions.
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