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Whitman Wire

Vol. CLIV, Issue 10
Whitman news since 1896

Whitman Wire

Whitman news since 1896

Whitman Wire

Republicans’ self-serving attack on financial reform

After nearly a year of refuting ridiculous rumors about “death panels” and government takeovers, President Obama signed health care reform into law last month. The Obama Administration’s next priority is financial reform legislation that could prevent a financial collapse like the one that precipitated the Great Recession of 2008.

You’d think that anyone whose memory reaches back to the fall of 2008: with banks failing left and right, the Dow plummeting and millions of Americans losing their jobs: would support such a bill. But sadly, partisan politics has once again trumped logic in the halls of Congress. In a too-familiar tactic, Republican leaders have self-servingly attempted to defeat the bill by misleading the American people.

Senator Mitch McConnell (R-Ky.), the highest-ranking Republican in the Senate, declared on April 13 that “we cannot allow endless taxpayer-funded bailouts. That’s why we must not pass the financial reform bill that’s about to hit the floor.”

Senator McConnell’s statement is malicious and false.

First, the bill would not balloon the federal deficit by allowing “endless taxpayer-funded bailouts.” Rather, the bill would help prevent the same collapses that caused 2008’s financial crisis.

The Federal Deposit Insurance Corporation has the right to seize any bank that it deems likely to fail. Congress created the FDIC after the Great Depression made clear that without regulation, bank failures can send the economy into a downward spiral.

In the 1930s, banks were just that: places to deposit money and secure loans. Sub-prime mortgages and advanced financial derivatives didn’t exist, and the FDIC’s power was adequate to keep the financial industry stable. The FDIC is no longer adequate to regulate today’s complex financial industry. The proposed financial reform bill would extend regulatory authority like the FDIC’s to complicated financial institutions like Citigroup and Lehman Brothers.

Seizures under the new financial reform bill would not be “taxpayer funded,” as Senator McConnell alleges. Just as banks fund the FDIC through an insurance premium, the money for any “bailouts” under the new bill would come from the financial institutions themselves. Furthermore, the bill will make any future seizures far less likely by prohibiting the risky (and in some cases outright fraudulent) investment practices that led to the financial collapse.

Simply put, financial reform makes sense. The government should regulate financial institutions to prevent them from engaging in risky practices. The government should be able to seize institutions that put the entire economy in danger by making poor decisions.

So why are Senator McConnell and other Republicans working so hard to defeat it?

Despite their rhetoric, it’s not because Republican leaders have remade their party into the defender of middle-class America. Top-level Republicans remain allied with financial institutions. Wall Street executives and lobbyists are dedicated to defeating the proposed financial reforms and have held meetings with Republican brass while debating the bill.

Rather, the Republicans’ motivation for opposing the bill is transparent and self-serving. After proving unable to prevent health care reform, the GOP is desperate to hand President Obama a political defeat. And a recently leaked memo from a top Republican strategist shows that the party’s tactic of choice is linking any legislation to 2008’s bank bailouts, which are immensely unpopular.

This tactic is dishonest on numerous levels. Despite Republican efforts to link bailouts to the Obama Administration’s expansion of government, the bank bailouts where not Obama’s idea. Rather, they were the brainchild of Henry Paulson, Secretary of the Treasury under George W. Bush. Many Republicans, including Senator McConnell, voted for the bailout bill, which most economists agree was distasteful but necessary.

Despite their claims, Republicans are not opposing financial reform to protect taxpayers. They are doing so to protect their vested interests on Wall Street and to hand President Obama a political defeat. The pawns in their game are the American People, who might face a future economic crisis if the GOP blocks meaningful reforms.

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  • J

    John GeeApr 22, 2010 at 9:52 am

    You got it exactly right. The entire last year the GOP has had a strategy of opposition to Obama. In part, out of the hope that if Obama can’t get anything done, the GOP will benefit. In part because the GOP is still in denial that Obama is president. Health care legislation was a turning point. The GOP strategy backfired and the it cannot risk a second version of that failure.

    What a dishonest mess.