"As Financial Reform Repeal Rhetoric Begins, Cleveland Fed Rebuts Key House Republican Talking Point"
One of many items on the GOP wish-list for repeal is the Dodd-Frank financial reform law, which was passed to upgrade the nation’s regulatory structure after the 2008 financial crisis. Rep. Michele Bachmann (R-MN) has even introduced a repeal bill, co-sponsored by Reps. Darrell Issa (R-CA), Todd Akin (R-MO), Tom McClintock (R-CA) and Bill Posey (R-FL). And one turn of phrase upon which Republicans rely to disparage Dodd-Frank is that it enshrines the widely-reviled bank bailouts of 2008:
Rep. Michele Bachmann (R-MN): “It makes permanent bailouts going into the future.”
Speaker of the House John Boehner (R-OH): “It institutionalizes ‘too big to fail’ and gives far too much authority to federal bureaucrats to bail out virtually any company in America they decide ought to be bailed out.”
Rep. Mike Pence (R-IN): “This so-called financial services bill is nothing more than a permanent bailout.”
Rep. Jeb Hensarling (R-TX): “When they create a perpetual bailout fund, they enshrine the policy of ‘too big to fail’, where the big will get bigger the small will get smaller and the taxpayer will get poorer.”
In fact, the new website of the House Financial Services Committee, as Mike Konczal noted, “is already plastered with murmurs of permanent bailouts.” “The Dodd-Frank Act makes the government bailout regime permanent,” the website screams (while neglecting to mention that the new Financial Services Chairman, Rep. Spencer Bachus (R-AL), voted in favor of the actual 2008 bailout).
While this makes a nice talking point, it has never been true: the bill gives the government a new resolution authority to quickly resolve firms that are too big or systemically risky to go through a traditional bankruptcy. Here’s an analysis from the Federal Reserve Bank of Cleveland:
The new resolution authority creates a viable option to providing funds to failing firms and should send markets a clear signal of how such firms will be resolved. The provision of such authority by Congress does not, itself, end too-big-to-fail. Consistent and appropriate use of the authority, however, is an important step toward addressing the too-big-to-fail problem.
Hank Paulson, who as former President Bush’s Treasury Secretary was a key player in the government’s response to the 2008 financial meltdown, said that he “would have loved to have” the resolution authority laid out in Dodd-Frank. “We would have loved to have something like this for Lehman Brothers. There’s no doubt about it,” Paulson said.
ThinkProgress intern Paul Breer contributed research to this post.