By It must be tough being a Senate Republican these days. There really is no deal that can be reached with Senate Democrats that can be trusted, no law passed that won’t be broken, and no compromise reached that won’t be betrayed. Nothing is sacred anymore, especially the word of a Senator.
On Wednesday, after being assured that by Senator Chris Dodd (D-CT) that provisions for an unlimited bailout-takeover fund would be removed from his legislation, Senate Republicans lifted their objections to bringing the financial takeover legislation to the floor of the Senate.
In a statement, Senator Richard Shelby (R-AL), who had been engaged with deliberations with Dodd, said, “I appreciate Chairman Dodd’s assurance that my concerns relating to ending bailouts will be included in his bill. I take him at his word.”
Apparently convinced that a major breakthrough had been achieved, Senate Minority Leader Mitch McConnnell (R-KY) issued a statement saying, “The time afforded by my Republican colleagues and Sen. Ben Nelson was instrumental in gaining assurances from the Chairman that changes will be made to end taxpayer bailouts and the dangerous notion that certain financial institutions are too big to fail.”
Only there’s a big problem with this approach. Dodd never removed the bailout provisions. They’re still in there, on pages 277 through 284 of the substitute amendment offered by Senators Dodd and Blance Lincoln (D-AR), there is the unlimited bailout-takeover authority and fund administered by the FDIC.
At least Dodd had the courtesy to betray Shelby to his face, on the Senate floor. After Republicans lifted their objections to proceeding to debate, thinking they had a deal to remove the bailout provisions, Dodd promptly took to the floor to say, “We haven’t sealed anything, but we’ve had great conversations as two people of good will can have that I think will allow us to get there.”
And then, Dodd only promised to allow Republican amendments to be heard and debated. So much for his word!
Of course this is not the first time where the trust of Congressional Republicans has been betrayed when it comes to the never-ending bailout regime in Washington.
Don’t forget the grand compromise that brought House and Senate Republicans on board to the 2008 bailout. That “compromise” included in the Troubled Asset Relief Program was some form of an insurance program for so-called toxic assets. That part of it was never even enforced by either the Bush or Obama Administrations even though it clearly was stated in the law.
The $700 billion program was supposed to purchase mortgage-backed securities, but as noted by the Washington Times, only $30 billion was ever devoted to the purchase of the securities. Instead, the money wound up being used as a bank recapitalization fund for which is was never intended. Most of that money was promptly paid back, as apparently the banks that were “bailed out” were well-capitalized after all.
Banks and financial institutions instead opted to use a Federal Reserve program, which was never authorized by Congress, and lacked the same level of disclosure and oversight as TARP. The Fed wound up purchasing some $1.25 trillion of Fannie Mae and Freddie Mac’s mortgage-backed securities.
Is that what Congressional Republicans intended? Probably not. But that wasn’t the end of it. After the Senate explicitly defeated a bailout for GM and Chrysler using the TARP, then-President George Bush went ahead and extended the loans anyway to the bankrupt automakers from the Treasury program.
After that, Barack Obama abused the government ownership of the two companies to redistribute their ownership from the bondholders who kept them afloat to the labor unions that had put them in the red in the first place.
These experiences, by now, should be highly educational for the Senate Republican Caucus.
But they are not the only lessons that need to be learned. Senate Republicans would also do well to remember, and never forget, that the tea parties were born because of the bailouts and government takeovers in the first place. That, the GOP’s political misfortunes of 2008 can largely be attributed to their embracing the Wall Street bailout-takeover regime that Senate Democrats now seek to institutionalize permanently.
Public outrage over the bailouts and takeovers, and then the phony “stimulus,” and then the carbon cap-and-tax, and then ObamaCare, and on and on, have all spilled over to create the nation’s newest and most potent political force in the country. Thus far, this uprising of the American people has not abated, and the anger will only grow the more power government seizes.
Especially with the Dodd bill, which both Goldman Sachs and Citigroup wholeheartedly embrace. The Dodd bill creates moral hazard of the first order by giving the implied taxpayer backing to some 60 financial and insurance companies with over $50 billion in consolidated assets. The FDIC will levy assessments on these companies that the American people will pay for with higher costs of financial products and other fees to finance the unlimited bailout-takeover fund, or what the Senate is calling an “orderly liquidation fund.”
As ALG News has previously reported, the bill would also give unlimited authority to the government to seize any company in the country (financial or not) deemed “too risky”, and either keep their assets (i.e. nationalize) or redistribute to favored political constituencies, like labor unions.
Making matters worse, shareholders whose assets are liquidated, even if the company was not even insolvent, would have no recourse to federal courts, as the bill makes it illegal to sue over the assets of any government takeover.
As if that was not bad enough, the legislation addresses none of the root causes of the crisis: Fannie, Freddie, the Federal Reserve, the FHA, and HUD that weakened credit standards and pumped the system with easy money to inflate the housing, securities, and derivatives bubbles to catastrophic proportions in the first place. Now that those bubbles have popped, the bailouts have not ended, and the unbridled deficit-spending is ongoing in earnest, the nation’s credit rating and ability to repay its debts is threatened.
And Senate Democrats now want to institutionalize the system that nearly brought the global economy to its knees and has spawned the sovereign debt crisis with limitless deficit-spending.
In short, it’s a really, really bad bill. And should Republicans now fail to stop it, they could be sealing their permanent political destruction — because they will have directly aided and abetted the bankruptcy and sovereign default of the United States of its debt obligations.
Taxpayers cannot afford another 60 or so Fannie Mae’s.
Republicans must realize that none of their amendments or ideas will be of any consequence to the final outcome of this “debate.” After all, Republican ideas in TARP were never enforced. Congressional intent for the TARP bill was never followed as it was transformed into a recapitalization fund. Congressional rejection of the GM and Chrysler bailouts was overridden by executive caprice.
Have Republicans learned their lesson yet?
Should Republicans, for example, help to pass an amendment that the FDIC can only put into receivership financial companies, and not non-financial entities, what assurance can they offer the American people that it will ever be followed?
Should they pass an amendment that Fannie and Freddie’s assets must be sold privately by 10 percent every year, or sold off altogether, what assurance can they give the American people that it will even happen?
Should there be an amendment requiring Federal Reserve assets acquired through that agency’s lending program to be moved onto the nation’s balance sheet, what assurance can be offered that the Fed will ever comply?
There is none.
And there is no deal they think they have with Senate Democrats that can ever be trusted again, as seen with the latest betrayal by Senate Majority Leader Harry Reid and Chris Dodd. The American people have no faith — none — that any compromise will result in anything but the most horrendous, unintended outcome.
The American people are generally a decentralized force politically, which is what makes them so potent when activated with national issues. And they will never forgive Republicans should they now go along with the Dodd bill. No matter how good the deal seems at the time, the American people will never believe it, nor will it ever be followed.
The American people have had enough with the bailouts and government takeovers, and their trust in government has been shattered. So, Senate Republicans must take care that they don’t get fooled again. Because the American people are no longer fooled.
Robert Romano is the Senior Editor of ALG News Bureau.
