MCCONNELL FINDS HIS TALKING POINT…. Senate Republicans want to kill legislation intended to reform the way Wall Street operates, but aren’t quite sure how to make this politically palatable. Americans still aren’t fond of the financial industry — its recklessness brought the global economy to its knees, and a lot of us hold a grudge — and want to see reform. The GOP wants to deny Democrats a victory and help Wall Street, no matter the costs. What to do?
The first step for Senate Republicans was to have a private meeting with elite hedge fund managers and other Wall Street executives. The second step was to make it seem like the Democratic proposal to clean up the industry is somehow pro-bailout.
Republicans spent much of the recess gaming out their strategic posture on the Democrats’ push to pass a major Wall Street reform bill, and it looks like they’ve finally settled on one: The GOP will oppose the proposed new regulations on the grounds that they will make future bailouts of big financial institutions more likely. And in adopting that line, they’ve taken a page straight out of the playbook of one of the conservative movement’s top message men.
“We cannot allow endless taxpayer funded bailouts for big Wall Street banks,” said Senate Minority Leader Mitch McConnell on the floor this morning. “That’s why we must not pass the financial reform bill that’s about to hit the floor. The fact is this bill wouldn’t solve the problems that led to the financial crisis. It would make them worse.”
McConnell said the bill in question, authored by Senate Banking Committee chairman Chris Dodd, would “not only allow for taxpayer funded bailouts for Wall Street banks. It institutionalizes them.”
Remember, it doesn’t have to make sense. It doesn’t have to be true. It doesn’t even have to be persuasive. It just has to be repeated, endorsed by conservative media, embraced by right-wing activists whose ignorance is easily exploited, and folded into the “debate” for the American mainstream.
Ezra Klein had a good piece evaluating the substance of McConnell’s claim.
The Dodd bill makes bailouts less likely by empowering regulators and increasing transparency, raises a $50 billion fund from banks to pay for future too-big-to-fail bankruptcies, and then makes the outcome a predictable punishment rather than a chaotic rescue. That last is known as “resolution authority” — as bloodless a word as one could possibly imagine — and it wipes out both shareholders and management. It’s all there in Section 206 of the bill: “Mandatory Terms and Conditions for All Orderly Liquidation Actions.” What we call “resolution” would better be described as “execution.”
But there’s a good argument to be made that this bill doesn’t go far enough. On some level, so long as we have systemically important firms, there will be the risk of bailouts. Management and shareholders might not win out, but many creditors will do better than they should, and so too will some firms.
So, if McConnell’s ultimate goal is to create an environment that would make the taxpayer-financed rescues a thing of the past forever — and remember, McConnell voted for the industry bailout in October 2008 — he’d have to endorse some pretty extreme steps.
And that, of course, is the punch-line: McConnell opposes these extreme steps to prevent future bailouts and opposes any legislation that might lead to future bailouts.
It is, in other words, another classic example of why Mitch McConnell and a few too many of his GOP colleagues simply aren’t serious about public policy. Their positions are crafted to win p.r. fights, not shape effective laws.
In this case, McConnell’s new talking points have been shaped, almost word for word, by a strategy memo published by Republican pollster Frank Luntz.
It’s easier than thinking.