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.

This week, Deputy Treasury Secretary Neal Wolin delivered a speech at the U.S. Chamber of Commerce in which he took the Chamber to task for lying about the effects of financial regulatory reform, and particularly the push to create an independent consumer protection entity within the regulatory structure. As Wolin put it, the Chamber “has launched a lavish, aggressive and misleading campaign to defeat the proposed independent agency”:

Despite the urgent and undeniable need for reform, the Chamber of Commerce has launched a $3 million advertising campaign against it. That campaign is not designed to improve the House and Senate bills. It is designed to defeat them.…We believe that the fight against financial reform is shortsighted and misguided.

CNBC host Larry Kudlow, a disciple of Ronald Reagan who has sworn undying fealty to supply-side economics, also took the Chamber to task this week for its stance on regulatory reform, saying that “the Chamber of Commerce is a very negative force on this. Absolutely negative and absolutely wrong in my humble opinion.”

Having been hammered from left and right, you’d think the Chamber would get the message. However, Thomas Quaadman of the Chamber’s Center for Capital Markets Competitiveness was on C-Span today, fearmongering that the consumer protection agency would regulate department stores and dentists:

If you extend credit, you’re going to fall within the parameters of this agency…Macy’s and Sears, and you know what, in certain circumstances if you have a high dental bill that you need to pay off over the course of time, that dentist could be regulated by that agency. So we don’t think that the dentist, or the butcher, or the florist that extend credit to their customers should be regulated by Washington bureaucrats.

Watch it:

House Republicans used the same tactic during its regulatory reform debate — claiming that the new agency would regulate churches and doctors — and the charge is no more true now than it was then. Both the bill that the House passed last year and the bill that the Senate Banking Committee passed this week contain clear exclusions “for merchants, retailers, and other sellers of non-financial services.”

In fact, the Senate bill explicitly states, on page 1080, that the consumer protection bureau “may not exercise any rulemaking, supervisory, enforcement, or other authority under this title with respect to a merchant, retailer, or seller of nonfinancial goods who extends credit directly to a consumer, in a case in which the good or service being provided is not itself a consumer financial product or service.” So unless the dentist that Quaadman is referencing is hawking credit default swaps between root canals, he has nothing to fear from financial reform. The Chamber is merely continuing to dishonestly whip up opposition to a bill meant to protect consumers from Wall Street excess.

Our guest blogger is Andrew Jakabovics, the Associate Director for Housing and Economics at the Center for American Progress Action Fund.

Today, the Obama Administration will be announcing several new initiatives to bring relief to homeowners struggling to pay their mortgages. But the big news is that the administration has come up with the first systematic set of policies to address the problem of negative equity (homeowners owing more than their home is worth) by bringing mortgages down to the current value of the properties.

An estimated 24 percent of all houses with mortgages are worth less than the remaining balance on those mortgages. By writing down the outstanding loan to bring it in line with the current value of the property, there is an opportunity to create mortgages that are likely to keep paying over the long term and minimize the walkaway risk.

Since the housing crisis began, CAP has argued that the best solution is to restructure mortgages to reflect current property values. Drawing on the experience of history, the new FHA/TARP program announced today fits the bill.

In what is essentially a modern version of the New Deal’s Home Owners’ Loan Corporation, a borrower who is current on her loan but who owes more on her home than it is currently worth can refinance into an FHA loan for 97 percent of the property’s current value. Incentives will be paid to servicers to allow these borrowers to refinance for less than the outstanding amount. Given the much larger losses lienholders would face if borrowers defaulted, cash in hand may be sufficiently attractive to allow these short-refis to proceed.

Even though these refis will be FHA loans in all respects and must qualify on those terms, TARP will be on the hook for future claims, with $14 billion in TARP funds being set aside for this program in a first loss position. As an added benefit, the program will also bolster FHA’s insurance fund, whose excess reserves are below their statutory minimum, since premiums will be paid into the fund but claims will first be drawn down from TARP. Read more