05.05.2010 0

So, the Republicans Were Right About those Bailouts After All

By Kevin Mooney –

Apparently, Republican critics of Sen. Chris Dodd’s financial overhaul legislation were spot on when they warned against additional taxpayer-funded bailouts of Wall Street banks. This is made evident in the headline of a news story appearing in the business section of The New York Times that reads as follows: “Democrats Tweak Bank Bill to Preclude Bailouts.”

That’s quite an admission.

Earlier reports were dismissive of the idea that bailouts were included as part of the package, but The Times is no longer arguing this point. An amendment from Sen. Barbara Boxer (D-Calif.) that is intended “tighten language in the bill” is explored at some length in this latest report.

Just for the record, here is what Minority Leader Mitch McConnell (R-KY) had to say before the financial legislation came up for formal debate:

“This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them,” he warned. “If you need to know one thing about this bill, it’s that it would make it official government policy to bail out the biggest Wall Street banks. So if the administration is looking for bipartisan support on this Wall Street bill, they can start by eliminating this aspect of the bill — not because Republicans are asking for it, but because community bankers all across the country and American taxpayers are demanding it.”

In response, President Obama accused McConnell of making “the cynical and deceptive assertion that reform would somehow enable future bailouts – when he knows that it would do just the opposite.” Earlier this week, Obama took another swipe at Republicans via The Times. “What’s not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it’s not factually accurate. It is not true.”

Oh really?!

There’s an element here of  “me doth thinks you protest too much” and The Times could do a great service by invoking quotes that do not seem to stand up against hard facts. After blithely dismissing Republican concerns in earlier stories, The Times now informs readers that there is good amount daylight between the legislative actions of Sen. Boxer and her public rhetoric.

“In a floor speech, Mrs. Boxer again rejected the Republican criticism, although her amendment suggested that there might have been some reason to question the possibility of future bailouts,” report acknowledges.

“When I heard my colleagues on the other side say Senator Dodd’s bill would ensure taxpayer bailouts, I knew it was false,” Sen. Boxer declared. “It is like saying this glass of water is a cup of coffee. No, this glass of water is a glass of water. It is not coffee.”

The floor fight could last for a few weeks and Republicans do have enough votes to filibuster Dodd’s bill and prevent it from becoming law.

Up  until now, the coverage has been weighted in the direction of Goldman Sachs and some of its questionable financial transaction and business decisions as opposed to the particulars of Dodd’s bill. This latest report concerning Sen. Boxer’s amendment is indicative of  a new direction.

The Times finally offers up some specifics that are reported as follows:

“In a provision titled, `Liquidation required,’ Mrs. Boxer’s amendment states: “All financial companies put into receivership under this title shall be liquidated. No taxpayer funds shall be used to prevent the liquidation of any financial company under this title. All funds expended in the liquidation of a financial company under this title shall be recovered from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.”

“Her amendment also stresses that taxpayers will not pay for shutting down failed companies,” the report continues.

“Taxpayers shall bear no losses from the exercise of any authority under this title,” it [the amendment] states. “All funds expended in the liquidation of a financial company under this title shall be the responsibility of the financial sector, through assessments.”

The opportunity here is to dig into the other provisions that have  been a source of consternation and debate. Whether or Goldman Sachs engaged in duplicitous practices is not the central question. At issue here is whether or not the government should absorb the costs of bad business decisions.

This post was originally featured at TimesCheck.com.

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