Yesterday, Rep. Spencer Bachus (R-AL) appeared on C-Span and laid out his main reason for opposing H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, which is the regulatory reform legislation that the House has begun to debate. Evidently, Bachus has a problem with the proposal to implement a “too big to fail” tax on financial giants, which would build a fund that would be tapped in the event that a large financial institution fails and needs to be unwound.
This fund (officially known as the Systemic Dissolution Fund) is meant to ensure that taxpayers stay out of the bailout business, by providing a pool of money — put up by the Wall Street behemoths themselves — that would be used to facilitate the orderly dismantling of a failed institution. This would correct for some of the problems that arose when AIG and Citigroup got into trouble (and to head off the sort of chaotic collapse exhibited by Lehman Brothers).
Republicans though, made it clear on the House floor that their opposition will be based on calling the fund “permanent TARP” and a “permanent bailout fund,” while falsely claiming that taxpayers and non-financial companies will have to pay for it. Watch a compilation:
Unless the “schoolteachers in Mesquite, Texas” that Rep. Jeb Hensarling (R-TX) referenced have more than $50 billion in assets and have taken to hawking credit default swaps in the cafeteria, this tax will not affect them. And as far as the levy hitting “small businesses,” unless Goldman Sachs is now a small business in the eyes of the GOP, there is no truth to this.
Instead of enshrining bailouts, the bill quite clearly stipulates on page 397 that the dissolution fund can only be used “to facilitate and provide for the orderly and complete dissolution of any failed financial company or companies that pose a systemic threat to the financial markets or economy.” The fund cannot be employed to turn companies into zombies like Citigroup, which is wise, as Treasury is still struggling with how to dispose of Citi.
As Rep. Ed Perlmutter (D-CO) said on the floor in response to the GOP’s rhetoric, “there is no bailout. As much as my friends on the other side of the aisle would like to be on message and continue to repeat that, there is no bailout.” Though they dress it up in populist language, the GOP is endorsing the regulatory approach that led to AIG’s repeated infusions of taxpayer money and the market shock that was felt in the wake of Lehman Brothers’ collapse. But what more should we expect from the party that is huddling with financial services lobbyists to decide how to best kill regulatory reform?