This week, Sen. Bob Corker (R-TN) ripped his Republican colleagues for failing to negotiate with Senate Banking Committee Chairman Chris Dodd (D-CT) on financial regulatory reform. Corker said that failure to work with Dodd — and subsequently allowing Dodd’s bill to pass out of committee with no Republican votes — was a “major strategic error.”
“I don’t think people realize that this is an issue that almost every American wants to see passed. There’ll be a lot of pressure on every senator and every House member to pass financial regulation,” he said, adding that “lack of enthusiasm from his colleagues” led to Dodd’s decision to cut off negotiations and proceed with his bill.
The Banking Committee’s ranking member, Sen. Richard Shelby (R-AL), could have taken this criticism to heart. Instead, he fired off a letter to Treasury Secretary Tim Geithner yesterday in which he falsely claimed over and over that Dodd’s bill “institutionalizes ‘too big to fail’“:
While Senate Banking Committee Chairman Dodd’s most recent financial reform bill represents an improvement over the bill you sent to Congress last year, it does not end the problem of “too big to fail” and will not end the associated moral hazard. Also, it does not ensure that taxpayers are protected from the costs of bailing out failing financial institutions...The bill reported out of committee sets up a $50 billion slush fund that, while intended for resolving failed firms, is available for virtually any purpose that the Treasury Secretary sees fit. Nonetheless, the mere existence of this fund will make it all too easy to choose a bailout over bankruptcy.
I could repeat my case here that Dodd’s bill does a pretty adequate job taking care of “too big to fail” banks that are, in fact, failing. But instead, I’ll turn it over to two conservatives: Corker and CNBC’s Larry Kudlow. Corker said that while “some tightening up that needs to take place,” in general “the bill does not enshrine “Too Big To Fail.’” “In general, the concept there is good,” he said. Kudlow added that “I know the language may not be 100%, but the language looks pretty tight to me. The end of too big to fail bailout nation.”
According to a new poll from the Pew Financial Reform Project, 59 percent of Americans “believe Congress and the President need to reform our financial system now.” The poll also showed that “only 18 percent said they would be more likely to reelect their representative if Congress does not take action on financial reform this year, while 40 percent reported that they would be more likely to vote against reelecting their Congress member.”
Dodd’s bill can, of course, be strengthened. But to claim that Dodd doesn’t take steps toward ending “too bil to fail” is to hew to the Frank Luntz financial reform line. It’s a shame that Corker seems to be the only Republican willing to forego that route.