Here we go again with Republicans, different day same story. This time instead of Health Care Reform Republicans now seem to focus their party of “No” ways to Financial Reform. In late 2008 when our financial system was falling apart and barely hanging by a thread; the United States enacted a bailout plan to save our economy. This plan was not received well by many Americans as the government went in and saved “Fat Kat” corporate suits that took advantage of a poorly regulated industry and manipulated their ways to record earnings (Goldman Sachs). So with the public outraged about bailouts and the government taking ownership (large shares) of companies like GM, CitiGroup etc… You would think legislation to help prevent something like this from happening again would be widely supported by both Republicans and Democrats.
Well, not the case when it comes to Senator Mitch McConnell (R-KY). He decided he was going to be against a Democrat backed Financial Reform legislation and attempt to label it an endless practice of bailing out “Big Banks”. Instead of encourage bi-partisanship McConnell decided he would continue the GOP’s “Obstructionist” ways. What McConnell miscalculated is that the public is not as divided on Financial Reform as they were on Health Care Reform. Not sure what McConnell was thinking, one thing has remained true; the public wants no part of bailing out Wall Street.
So exactly what is Senator McConnell trying to derail? Here are 6 key points of the Financial Reform legislation (via Washington Post):
1. A Consumer Financial Protection Bureau, housed inside the Federal Reserve, would write and enforce rules protecting borrowers from abuse by lenders.
WHAT IT MEANS: The location of the agency is a nod to Republicans and conservative Democrats who oppose the creation of a free-standing consumer agency, but everything else about this proposal is designed to please liberals, giving the consumer agency sweeping powers and imposing few checks on that authority.
2. A Financial Stability Oversight Council, chaired by the Treasury secretary, would coordinate federal efforts to identify and manage risks to the financial system and the broader economy.
What it means: Dodd wanted to give the council broad responsibility for policing systemic risks. After massive administration pressure, he agreed instead to give much of that power to the Fed. The oversight council will instead function essentially as the Fed’s board of directors on regulatory issues, signing off on its decisions.
3. A new process would allow for the liquidation of large, failing financial firms.
WHAT IT ME ANS: Companies could be liquidated by joint agreement of the Treasury Department, the Fed and the Federal Deposit Insurance Corp., which already administers bank failures and would play a similar role in the new process. Costs would be paid from a $50 billion pool of money gathered from large financial companies.
4. Credit-rating agencies would be regulated and liable for errors.
WHAT IT MEANS: Breaking with the administration and the House version of financial reform, Dodd’s bill would hold Moody’s, Standard & Poor’s and other rating agencies potentially liable for their judgments about the safety of bonds and other investments. The industry also would be regulated by the Securities and Exchange Commission.
5. Banks would face new limits on trading and investment activities.
WHAT IT MEANS: The bill would restrict banks from running their own investment portfolios or hedge funds, an administration proposal known as the “Volcker Rule” that Dodd initially had rejected. The bill also would regulate the massive trade in derivatives, increasing the proportion of such trades that are publicly reported.
6. Some renovations would be made to the structure of federal banking regulation.
WHAT IT MEANS: Dodd abandoned his earlier proposal to create a single banking regulator after critics argued that the upside was not worth the effort. The bill still would eliminate the Office of Thrift Supervision. The Fed’s authority over smaller banks would be split between the FDIC and the Office of the Comptroller of the Currency.
To most rational people all 6 points listed above can be agreed on as being necessary, BUT McConnell for whatever reason decided that point #3 was a clear-cut bailout for banks that the tax payer would be stuck with. Here is point #3 again:
A new process would allow for the liquidation of large, failing financial firms.
WHAT IT MEANS: Companies could be liquidated by joint agreement of the Treasury Department, the Fed and the Federal Deposit Insurance Corp., which already administers bank failures and would play a similar role in the new process. Costs would be paid from a $50 billion pool of money gathered from large financial companies.
So McConnell decided to paint the $50 billion dollar pool that banks would pay into as a bailout the banks would be able to use to stay afloat, WRONG!!!! The truth is that $50 billion dollars that the BANKS PAY INTO will be used to fund the SAFE unwinding of any banks in need. For example, if this legislation was in place in 2008 when Bank of America was in danger of going under; they would have been forced to use this fund to safely unwind their business.
What do I mean by safely? Bank of America (BOA) is a large enough bank with holdings/investments in several areas; just allowing the bank to fail would have negatively impacted businesses that rely on them and the overall economy. The $50 billion dollar fund would be used to help untangle Bank Of America’s investments and keep intact any business involved with BOA. Also in using this fund the Executive Management Team and The Board of Directors (the people responsible for the BOA’s failures) would be removed. This is in NO WAY A BAILOUT!!!!!!
To be fair to Senator McConnell deep down I don’t believe he really thinks this is a bailout. He is caught up in partisan politics, and it is a shame; fortunately for us (the people) not every Republican is following McConnell on this one. Senator Bob Corker (R-Tenn.) stood up to the ridiculous notion of calling Financial Reform a bailout. He stood on the floor of the Senate and clearly stated this is “Not A Bailout…”. As I have stated in previous blogs we have to move past this partisan mindset; that goes for Republicans and Democrats! Don’t fight legislation because you are trying to prevent the other side from doing anything productive. No good can come from that type of mentality, hopefully more Congressmen/women will take Senator Corker’s lead and do what is right.
Also keep in mind that we the people have responsibility in this as well, it is up to us to search for the truth. That means do the research before forming an opinion; just don’t take the one-sided stories of FOX News, CNN, or MSNBC. Listen to all view points and form your own opinions, the truth is out there!
As always….
If there is something to be said, “Its On Broadway” to step up and say it!!!
It’s time for the Democrats outside of the President to step to the forefront and start conveying the message needed to hold off a Republican takeover. Democrats are caught in a catch-22 right now as there best speaking voice happens to be an unpopular speaking voice; President Obama. Currently Democrats are trying to figure out the best way to use the President on the campaign trail; while the President received a raucous welcome at the University of Texas there was no sign of Democrat Bill White who is running for Governor of Texas. If Democrats want to hold onto control of the House (not likely) and Senate the likes of Nancy Pelosi, Harry Reid, Charles Schumer, and Barney Frank have to start putting their stamp on the message. Republicans like John Boehner and Mitch McConnell are always in front of the cameras; I know this because their foolish comments are always great material for political satire for shows like The Daily Show, Countdown (Keith Olbermann) and The Rachel Maddow Show.
It's On Broadway 