Last night, the entire Republican Senate caucus — joined by Sen. Ben Nelson (D-NE) — succeeded in blocking Sen. Chris Dodd’s (D-CT) financial regulatory reform bill from coming to the Senate floor, setting up another vote this afternoon and potentially a third on Wednesday.
For months now, the GOP has been falsely saying that Dodd’s bill would institutionalize “too big to fail,” when in fact the bill lays out a resolution authority that would allow the government to unwind large, failing financial firm with money fronted by the financial industry itself. Sen. Bob Corker (R-TN) tried to dispel this false GOP notion last week, but evidently to no avail, as Sen. Kay Bailey Hutchison (R-TX) was on CNBC last night reviving the same meme.
CNBC’s Larry Kudlow asked her “if Citigroup is on the road to failure, is it your view, is it the GOP view that it should fail and be liquidated?” Of course, Hutchison said yes, making it seem as if Dodd’s bill wouldn’t do the job:
Yes, I think you have to set a bar, because if you leave wiggle room, then you are saying, ‘hey, if you’re really too big and it really would make a difference, then you can have this cushion.’ And if we do that, then too big to fail will always be with us. So, yes, we are. Now there is a way that we can certainly give flexibility to the governing agencies for making sure that there’s liquidity, that you can service your customers. But there should be the ability for any bank or financial institution to fail, any one of them, or we will never get rid of it.
What Hutchison laid out sounds pretty good. But if she actually believes in what she said, she should have voted for the bill last night, as it would allow for the orderly dissolution of failed financial firms, with money provided by the banks themselves. It’s not clear from Hutchison’s statement that she has any substantive difference with the Dodd bill that she felt the need to vote against.
Of course, there’s a very good political reason for the GOP to take its current line towards the Dodd bill, voting against it for reasons that don’t make sense. As the Wall Street Journal reported today, the GOP’s stand against financial reform is reaping benefits in terms of campaign contributions from Wall Street. In fact, “for the first time since 2004, the biggest Wall Street firms are now giving most of their campaign donations to Republicans.” Many financial institutions, including Goldman Sachs, wrote $15,000 checks to the Republican party last month.
According to one GOP staff member quoted in the Washington Post, Republicans are working on a financial reform bill that they may or may not release. “It may come to the point where Republicans decide, ‘Let’s just put out specifically what we’re for.’ That decision hasn’t been made yet,” the staffer said.