Yesterday, the House Financial Services Committee approved an amendment to its regulatory reform bill that would allow federal regulators, in consultation with the Treasury Secretary, to require any firm deemed a threat to the U.S. economy to break up and shrink. The amendment, proposed by Rep. Paul Kanjorski (D-PA), was bitterly opposed by the financial services industry, but still passed 38-29 (with three Democrats voting against).

Though regulatory reform legislation has been moving in the House for weeks, the Senate only started today, with members of the Senate Banking Committee giving their opening statements regarding Chairman Chris Dodd’s (D-CT) reform bill. Republicans, who have already said that they will lend the regulatory reform effort zero support, were unanimously opposed to the bill, particularly the provision to create a Consumer Financial Protection Agency (CFPA).

But Sen. Judd Gregg (R-NH) also took a few minutes to criticize the Kanjorski amendment, stating that it was too “European,” and that it empowers the government to break apart Coca-Cola and Wal-Mart, the latter because “they don’t have a union“:

The Kanjorski amendment that was dealt with yesterday on the House side was an exercise in European politics where there was some belief that a group of thoughtful people can choose winners and losers in the marketplace that are still doing well, that aren’t at risk, and decide how those winners and losers should be structured. Well where does that stop? Is Coca-Cola, should they be broken up under the House bill? Wal-Mart, maybe, because they don’t have a union, should be broken up under the House bill? This is undermining the American advantage, especially relative to our European neighbors.

Watch it:

While Wal-Mart’s lack of unionization is a shame, Kanjorski’s amendment clearly states that it only pertains to financial institutions, which can be broken apart only for threatening the financial system, and only after more stringent capital requirements have proven ineffective in removing the threat:

Scott Valentin, the banking analyst at FBR Capital Markets, told DealBook that he expects the Kanjorski’s push will meet its demise in the Senate, as “Wall Street’s objections…will win out in the end.” Valentin “based his opinions partly on meetings he had with Senate Republican staffers the day before the final language of the bill was released.”

Our guest blogger is Michael Linden, Associate Director for Tax and Budget Policy at the Center for American Progress Action Fund.

There’s been a fair bit of hemming and hawing over the news that the federal debt has now surpassed $12 trillion. Sen. Judd Gregg (R-NH), widely known for his fiscal hawkishness during Democratic administrations, couldn’t resist pointing the finger, saying, “this level of fiscal recklessness and irresponsibility should be shocking to the American taxpayer, especially since it is our children and grandchildren who will be forced to grapple with the consequences of our debt.”

While this milestone is actually nothing of the sort – $12 trillion is gross federal debt, not the debt owed to the public, which is the much more important figure – you can be sure that many people will use this as another excuse to condemn what Gregg called “expensive expansions of government” and to blame all of our fiscal problems on President Obama. But here are three facts about this year’s deficit that you probably won’t hear much about:

– Less than one-fifth of all the new spending in FY 09 came from Obama initiatives;

– The big deficit this year was as much a product of a huge decline in tax revenues as it was an increase in spending;

– The overall cost of the decline in tax revenues was four times larger than the cost of Obama’s initiatives.

These facts don’t fit with the narrative of an Obama “spending binge.”

It’s true that there was a big increase in spending in fiscal year 2009. Total spending rose by about $600 billion, not counting payments for interest on the debt (which actually declined in 2009 because of extraordinarily low interest rates).

But fiscal year 2009 began on October 1, 2008, when George Bush was still president, and by the time President Obama took office more than 40 percent of that new spending had already been committed, in the form of TARP and the bailouts for Fannie and Freddie. Another quarter of the new spending came from growth in entitlement programs and unemployment insurance, which was certainly outside the control of a new president.

The American Recovery and Reinvestment act, on the other hand, was responsible for only 18 percent of the new spending in 2009. So, spending did rise, but only one in five of those new dollars came from Obama’s initiatives.

And spending is only half the story. The other half is that tax revenues plummeted this year to their lowest levels since 1950.

Johnny-come-lately fiscal hawks almost never talk about the tax side of the balance sheet when they rail against deficits, because it’s more politically expedient to point fingers at the Recovery Act. But the size of the decline in tax revenues was four times larger than all the Recovery Act spending this year!

This year’s deficit was eye-catching, but it didn’t just appear out of the blue on January 20th, and it isn’t just a product of new spending. If you hear some pundit or politician claiming that a huge expansion of government is responsible for our fiscal woes without mentioning President Bush and with nary a word about tax revenues, you can be pretty sure that he’s more interested in scoring political points than actually solving problems.

Back in May, Congress approved and the President signed legislation reforming the credit card industry, ensuring that credit card companies couldn’t raise rates for no reason or retroactively increase rates on existing balances. However, most of the new rules don’t go into effect until February, 2010.

In the interim, banks have been jacking up rates left and right. In fact, half of Americans report that their credit card rates have been raised in the past six months. According to Pew Charitable Trusts’ Safe Credit Cards Project, the lowest interest rates offered on most bank cards “jumped by more than 20 percent” in that time.

To deal with this problem (which is significantly of their own making), Democrats crafted a bill bumping up the implementation date of the new regulations and freezing interest rates until the new laws come into effect. The bill was approved by the House on a vote of 331-92 earlier this month.

Due to a packed floor schedule, there was no stomach in the Senate for a prolonged fight over credit cards. So, as Ryan Grim noted “the only way Democrats could pass the bill in time for the holidays would be with the support of the GOP.”

Sen. Chris Dodd (D-CT) tried to do just that yesterday, with the support of Sen. Mark Udall (D-CO), by asking for unanimous consent to bring the bill to the floor. However, Sen. Thad Cochran (R-MS) objected “on behalf of several senators on this side of the aisle,” killing the whole effort. Watch it:

According to Pew, none of the credit cards currently offered online by the 12 largest U.S. banks “would meet requirements of new federal curbs on the industry’s rates and fees.” But Republicans still saw fit to allow the credit card companies to do whatever they want until the new rules comes into effect next year.

As the Coloradoan reported, “Republicans didn’t explain their decision to block a vote…beyond Cochran’s short objection.” Dodd, clearly expecting an objection, lamented that a bill “that would really have allowed us to do something meaningful” was being derailed.

This is, sadly, exactly how the rest of the financial regulatory reform debate is going. Yesterday, Senate Republicans said that “there is no support within the GOP for the financial overhaul plan outlined last week by Democrats.” “My understanding is that it’s not acceptable to any of the Republicans on the [banking] committee as it now stands,” said Minority Leader Mitch McConnell (R-KY).

That’s right. In the wake of the financial crisis, not one Republican is prepared to vote for regulatory reform. And the reason is that “they think the plan goes too far by putting onerous restrictions on Wall Street that could limit the availability of credit.” So by preventing the credit card bill from going forward — and by uniting in opposition against wider regulatory reform — the GOP is endorsing the credit card companies’ actions and the wider return to rampant risk on Wall Street.