Senate Minority Leader Mitch McConnell (R-KY) took to the Senate floor today to repeat the false assertion that the pending financial reform bill will lead to further taxpayer-funded bailouts. A number of other Republicans — including House Minority Leader John Boehner — have repeated the false right-wing talking point.
The language originates from the advice of pollster Frank Luntz, who has urged Republicans to frame the final product as filled with bank bailouts. Republicans have thus asserted that the proposed resolution fund, negotiated by Sens. Bob Corker (R-TN) and Mark Warner (D-VA), amounts to a “50 billion dollar bailout fund.” The resolution authority, of course, has the opposite purpose: It is designed to eliminate too-big-to-fail institutions, not prop them up. It would raise $50 billion “from the largest financial firms” to provide for the orderly unraveling of big, systemically important institutions in the event it is needed — without forcing taxpayers to cover the losses.
Today on the Senate floor, Sen. Bob Corker (R-TN) debunked his conservative colleagues’ talking point, saying that the fund “is anything but a bailout”:
CORKER: But this fund that’s been set up is anything but a bailout. It’s been set up to, in essence, provide upfront funding by the industry so that when these companies are seized, there’s money available to make payroll and to wind it down while the pieces are being sold off. Now, a lot of people have said this is a Republican idea. There’s no question that this is something Sheila Bair has proposed. The fdic wants to see a prefund. The treasury would like to see a postfund.
Corker explained that all serious debate over the resolution fund concerns whether to “pre-raise” the money in anticipation of a bank failure, or to require the financial industry to fund resolution after an institution has crashed. Corker called the rhetoric “silly,” pointing out that “either way, you’ve got to have the monies available to shut the firms down” without endangering the entire financial system.
McConnell has also sought to bring the Obama administration into his argument, saying yesterday on CNN’s State of the Union that Treasury Secretary Tim Geithner and former Clinton Secretary of Labor Robert Reich agreed with him that the fund would lead to future “taxpayer funded bailouts.” Reich quickly rebuked McConnell for mischaracterizing his position, writing that “When Mitch McConnell has to misquote me to find evidence he’s telling the truth, he is desperate.”
In any case, McConnell’s qualms about the resolution fund seem little more than a political stunt. TPM reports that even after the Obama administration signaled that it was willing to ditch the offending provision, the Republican leader has remained uncritically opposed to the bill. Echoing his rhetoric during the health care debate, McConnell told CNN’s Candy Crowley yesterday that “[w]e ought to go back to the drawing board.”