Republicans Give Up the Game

By
Monday, April 19, 2010 at 8:45 am

At the end of last week, the Obama administration reportedly told Senate Democrats to drop the $50 billion liquidation fund — often referred to as a “bailout fund” — from the financial regulation bill as a concession to Republicans. Senate Democrats broached the deal with Republican leadership. They refused.

Still, yesterday, Senate Minority Leader Mitch McConnell (Ky.) made the “bailout fund” the centerpiece of his argument against financial regulation reform on CNN’s State of the Union with Candy Crowley.

Of course, the “bailout fund” is no “bailout fund.” The idea is that banks would fund a $50 billion pool; were any to get into trouble, regulators would fire every member of management, wipe out shareholders, split the company up and sell the pieces, and tap the $50 billion fund to pay for the process and ensure the orderly dissolution of the firm. Companies like Citigroup were given bailouts during the crisis. This would be an execution (or, as Sen. Mark Warner (D-Va.) likes to say, a “death panel“).

Still, McConnell has made the fund a central talking point. The political calculation is clear: At least for now, Republicans believe that they are better off arguing the bill is not good enough rather than voting for reform, no matter how cynical and hypocritical it might seem.

Follow Annie Lowrey on Twitter


Comments

17 Comments

NECESSARY GOLFING INFO Putting Tips – Simple is Better | Swinging With Woods
Pingback posted April 19, 2010 @ 9:57 am

[...] Republicans Give Up the Game « The Washington Independent [...]


Florida Marlins vs. Washington Nationals Top Play | Washington Nationals MLB Announcer
Pingback posted April 19, 2010 @ 12:14 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


Swami_Binki
Comment posted April 19, 2010 @ 1:58 pm

Obama-Dodd financial bill would further enrich Goldman Sachs
by John Berlau
April 16, 2010 @ 3:28 pm

Today, the SEC charged giant investment bank Goldman Sachs with more than $1 billion worth of securities fraud for its dealings in the subprime mortgage market.

Ironically, at the same time the SEC is seeking justice for Goldman’s alleged victims, President Obama and Senate Banking Committee Chairman Chris Dodd (D-Conn.) are pushing a bill would reward the firm with potentially billions of dollars by instituting a so-called “resolution authority” that would, in practice, be a permanent bailout fund.

Supporters of Dodd’s bill maintain that it does not create bailouts because the failing firm’s shareholders would be wiped out and its managers would be fired. But what they don’t say is that the money from the $50 billion resolution fund would be used to frequently give creditors of this firm a better deal than they would have in bankruptcy.

Recall that during the financial implosion of late 2008, Goldman was not bailed out directly by taxpayers, but instead received tax dollars as a creditor of AIG. Goldman received $12.9 billion in the “backdoor bailout” of AIG because of the credit default swaps it owned that AIG had insured. Goldman and other of AIG’s counterparties were paid by the government 100 cents on the dollar in this bailout, whereas creditors in bankruptcy court often get less than 50 cents on the dollar.

So as American Enterprise Institute scholar and Financial Crisis Inquiry Commission member Peter Wallison puts it: “That act—paying off the creditors when the government takes over a failing firm—is a bailout. It doesn’t matter that the management lose their jobs, or that the shareholders get nothing. When the creditors are aware that they will get a better deal with the failure of a large company than they will get with a small one that goes the ordinary route to bankruptcy, that is a bailout.”

To top it off, the fees for the Dodd bill’s resolution fund that would pay off a failing firm’s creditors would come not just from banks but from a broad array of Main Street businesses. Stable life, auto and home insurance companies would have to pay into this fund to subsidize the failure of the next high-roller, and the fees they pay would likely be passed on in the premiums their policy holders pay. And the bill’s definition of “nonbank financial company” is so broad that it could cover manufacturers only tangentially involved in extending credit, such as those that lease equipment to their customers. This would raise prices and cost Main Street jobs.

All in all, the Goldman indictment should serve as a wakeup call to those who want to ram a bill through Congress without looking at who both its victims and beneficiaries would ultimately be.


Swami_Binki
Comment posted April 19, 2010 @ 2:01 pm

Crony-capitalism.


Forex Seminar – Make Money When You Click Your Mouse | Forex Made Easy
Pingback posted April 19, 2010 @ 3:54 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


Isothermal compressibility of macromolecular crystals and … | Crystallography Material Geek
Pingback posted April 19, 2010 @ 4:04 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


TAKE IT BACK obama! Love the rolling stones – spoof :The Longtail Music Catalog
Pingback posted April 19, 2010 @ 4:28 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


How come George W. Bush could not get big stars like Garth Brooks and U2 at his inaugurations? :Hyperstore International
Pingback posted April 19, 2010 @ 5:59 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


Republicans Give Up the Game « The Washington Independent - ferus.pl
Pingback posted April 19, 2010 @ 6:01 pm

[...] more here:  Republicans Give Up the Game « The Washington Independent Tags: daily-beast, drop-the, free porn pass, last-week, reportedly-told, senate-democrats, [...]


adventures_adventure trips_adventure trip_free online adventure games_adventure quest worlds » Farewell, Fighter Ace
Pingback posted April 19, 2010 @ 8:52 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


M25 | Host Rage
Pingback posted April 19, 2010 @ 9:27 pm

[...] Republicans Give Up t&#1211&#1077 Game « T&#1211&#1077 Washington Independent [...]


The Psychology Of Losing – Tricks, Traps & Sharks (eBook). | Treating Arthritis
Pingback posted April 19, 2010 @ 9:36 pm

[...] Republicans Give Up t&#1211&#1077 Game « T&#1211&#1077 Washington Independent [...]


McCain: Don’t Give Me That “Health of the Mother” Crap | CCFR
Pingback posted April 19, 2010 @ 9:44 pm

[...] Republicans Give Up the Game « The Washington Independent  Mail this postSHARETHIS.addEntry({ title: "McCain: Don’t Give Me That “Health of the Mother” Crap", url: "http://ccfr.info/92/mccain-dont-give-me-that-health-of-the-mother-crap/" }); [...]


Is there a Mario game that has Super Mario World and any other Mario game in it?
Pingback posted April 19, 2010 @ 10:08 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


5 Golf Courses in Northern France That You Must Play | The Secret 2 - Living an Abundant and Fulfilling Life
Pingback posted April 19, 2010 @ 10:40 pm

[...] Republicans Give Up the Game « The Washington Independent [...]


Phiiles at Marlins 9-22-09 Game 1 Free Pick MLB | Florida Marlins MLB Announcer
Pingback posted April 20, 2010 @ 11:38 am

[...] Republicans Give Up the Game « The Washington Independent [...]


RSS feed for comments on this post.

Sorry, the comment form is closed at this time.