Bank bailouts. It is one of those issues where the left meets the right. Something so universally despised from the tea party to Occupy that for a politician to come within ten feet of the issue might be to eventually risk a primary challenge.
Just ask Eric Cantor.
With that in mind, this is one of the few times Americans for Limited Government finds itself in agreement with Sen. Elizabeth Warren (D-Mass.) and House Minority Leader Rep. Nancy Pelosi (D-Calif.).
Specifically, Warren and Pelosi were complaining Section 630 of the omnibus legislation allowing derivatives traders, including foreign banks, to be eligible for Federal Deposit Insurance Corporation bailouts.
Besides taking apart the Dodd-Frank swaps push-out rule, the legislation itself expanded the definition of “covered depository institution” to include an “agency of a foreign bank” and “foreign banking organization (as such term is defined under Regulation K of the Board of Governors of the Federal Reserve System).”
So, presumably, banks in Europe that bet poorly on Greek government debt or China’s credit bubble might be eligible for bailouts under the provision.
Warren and Pelosi were right to complain that this got inserted into the omnibus.
Politically, the provision is dangerous for Republicans, since it simply looks like another TARP vote, something the conservative base of the GOP rightly opposed.
Which brings us to House leadership that put in the provision in the first place, thereby jeopardizing passage of the budget and risking a government shutdown they were guaranteed to get blamed for.
You see, prior to the provision’s insertion, House Speaker Rep. John Boehner (R-Ohio) was counting on Pelosi and her caucus to support getting the budget across the finish line. After it became a political hot potato — led by Warren in the Senate and Pelosi in the House — Democrats pulled their support for the bill.
In the meantime, Republican leaders temporarily lacked the votes of their own conference because they refused to include a provision halting the President’s executive amnesty for up to 4.5 million illegal immigrants with U.S.-born children, even as a separate item.
Turns out, when you try to please nobody, you end up pleasing nobody.
And so, at 2PM Eastern Standard Time on December 11, the House went into a long recess while leaders and the White House were still attempting to cobble together the votes necessary to pass the omnibus.
All this, and not even to really bail out foreign banks.
As the New York Times’ Peter Eavis notes, the real benefit for banks by including this in the omnibus was “Banks can make more money from derivatives trading by doing it in their insured subsidiaries. These subsidiaries usually have higher credit ratings than other parts of the bank, in part because of their implied government support. And the higher ratings enable the banks to get better terms in the derivatives bets they make with their trading partners, bolstering the banks’ profits.”
Was that really worth risking everything else for?
At least if there had been a provision defunding Obama’s executive amnesty — say, as a separate item from the omnibus directed at just those agencies that would have implemented the program — even if such a measure lacked the votes in the Senate, Republicans could have claimed the moral high ground. That they were fighting to stave off a constitutional crisis of Obama’s making.
Instead, House leaders who included the bank bailout jeopardized their entire bill in what will become 2014’s version of a bridge to nowhere. Eventually, the omnibus passed, but it makes one wonder whether making Elizabeth Warren a perceived white knight was in anybody’s interests.
Robert Romano is the senior editor of Americans for Limited Government.
