On the campaign trail, Mitt Romney has consistently attacked the 2010 Dodd-Frank financial reform law, which aimed to reform financial regulation in the wake of the 2008 financial crisis. Both Romney and his economic advisers say that they would repeal the law entirely, and they have given no indication of what they would do to upgrade a regulatory framework that so obviously failed.
But Romney’s running mate, Rep. Paul Ryan (R-WI), has written a budget — approved by House Republicans — that, while it doesn’t repeal the law entirely, removes one of its most important aspects, known as resolution authority. This power, which the government did not have in 2008, would allow the unwinding of failing financial firms without resorting to ad hoc bailouts. Under the process, the Federal Deposit Insurance Corp would dismantle collapsing, yet too-big-to-fail, banks, and any loss to the taxpayer would be recouped from the sale of the failed bank’s assets.
This is a much better alternative to the strategy employed in 2008, when financial behemoths were allowed to continue their existence after receiving hundreds of billions of taxpayer dollars. Then-Treasury Secretary Hank Paulson has said that the resolution authority power the Ryan budget repeals would have been useful during the crisis in 2008. “We would have loved to have something like this for Lehman Brothers. There’s no doubt about it,” Paulson said. Federal Reserve Chairman Ben Bernanke has said the same thing: “If a federal agency had had such tools on September 16, they could have been used to put AIG into conservatorship or receivership…That outcome would have been far preferable.”
Ryan himself has been a bit all over the place on financial reform, writing a budget that guts an important aspect of it but, at one time, seeming to endorse the concept of breaking up too-big-to-fail banks. Ryan also seemed to endorse the Volcker Rule, which is meant to prevent banks from engaging in risky trading solely for their own benefit.
But he also opposes singling out the biggest banks for more stringent regulations, calling such a move “not healthy.” And he is now half of a ticket that is calling for removing Dodd-Frank entirely, allowing the casino-like mentality of Wall Street to continue unabated.