Time's Swampland: Mitch McConnell and Frank Luntz talking points on Financial Reform

[flpoljunkie]

Some emphasis mine.

A GOP Financial Reform Bellwether

Posted by ADAM SORENSEN Tuesday, April 13, 2010 at 1:01 pm

Bit by bit, bipartisan negotiations in the Senate over financial regulatory reform have broken down. Richard Shelby, the ranking Republican on the Banking Committee split with the Democratic Chairman, Chris Dodd in February. Bob Corker filled the gap, stepping in to try to hammer out a compromise on an issue in which both parties see the potential for good policy and good politics. But wary of delays after a bitter health care fight, Democrats voted the bill out of committee in March with no Republican support, and now are looking to open up the legislation to amendments and debate on the Senate floor. As recently as last month, Republican leadership was open to a deal.

In a floor speech this morning, Senate Minority Leader Mitch McConnell threw cold water on the prospects of detente, establishing a hard line of attack against the Dodd bill, and indelibly marking the party line: "We must not pass the financial reform bill that's about to hit the floor."

The crux of his criticism is that the bill "institutionalizes... taxpayer-funded bailouts of Wall Street banks." He knocked the expansion of power at the Fed and Treasury, while sounding the alarm on Wall Street accountability. If the outline of his speech sounds familiar, it's because it is the exact argument pollster Frank Luntz urged Republicans to make earlier this year in a widely publicized memo. Compare the excerpts below (emphasis mine):

Luntz: "The single best way to kill any legislation is to link it to the Big Bank Bailout."

McConnell: "We cannot allow endless taxpayer-funded bailouts for big Wall Street banks. And that's why we must not pass the financial reform bill that's about to hit the floor."

Luntz: "Taxpayers should not be held responsible for the failure of big business any longer. If a business is going to fail, not matter how big, let it fail."

McConnell: ("The Dodd bill) gives the government a new backdoor mechanism for propping up failing or failed institutions.... We won't solve this problem until the biggest banks are allowed to fail."

Luntz: "Government policies caused the bubble and its ultimate crash. Fannie Mae, Freddie Mac, the Federal Reserve, and the Community Reinvestment Act all had a role in the catastrophe. The government inflated economic bubbles with easy credit policies."

McConnell: “It also directs the Fed to oversee 35 to 50 of the biggest firms, replicating on an even larger scale the same distortions that plagued the housing market and helped trigger a massive bubble we'll be suffering from for years. If you thought Fannie and Freddie were dangerous, how about 35 to 50 of them?"

more...

http://swampland.blogs.time.com/2010/04/13/a-gop-financial-reform-bellwether/

Luntz memo on 'The Language of Financial Reform': http://timeswampland.files.wordpress.com/2010/04/languageoffinancialreform.pdf

[Jennicut]

1. Another Luntzfail I see.

Let's stop another bank failure by happening by having no regulations! Then we don't have to bail it out. If that happened on a regular basis, our entire economy would be in a total wreck, in constant ups and downs. It is okay for the banks to totally screw us over by tanking the economy but we won't have to bail them out so it will make it all better. Luntzfail!

[flpoljunkie]

2. Ezra Klein: Mark Warner: Mitch McConnell 'either doesn't understand or chooses not to understand'

Sen. Mark Warner: Mitch McConnell 'either doesn't understand or chooses not to understand'

When Sen. Mitch McConnell said that the Senate financial-regulation bill meant "endless taxpayer-funded bailouts for big Wall Street banks," he was, knowingly or not, taking aim at a policy that had been jointly developed by Sens. Mark Warner (D-Va.) (pictured above) and Bob Corker (R-Tenn.). The two lawmakers began collaborating last spring, when they started holding joint briefings on the financial crisis. Eventually, Sen. Chris Dodd tasked them with handling the problem of what happens when too-big-to-fail firms, well, fail. He tasked them, in other words, with handling the problem of endless bailouts.

After months of meetings, the two finalized an agreement in February. That's the "resolution authority" part of the bill, which begins in section 201. And in an interview in his office this morning, Warner was not too happy with McConnell's characterization of their work. "It appears that the Republican leader either doesn't understand or chooses not to understand the basic underlying premise of what this bill puts in place."

"Resolution," Warner continued, "will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would've been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone."

Another element of the Republican critique concerns the $50 billion "orderly liquidation fund" that the FDIC will raise by taxing the banks. The idea of this fund is to create holdover money so the bank doesn't collapse while regulators are trying to unwind it. Sen. Richard Shelby, the ranking Republican on the Banking Committee, called it a "slush fund" and said that “the mere existence of this fund will make it all too easy to choose a bailout over bankruptcy.”

"Again," says Warner, "it's either that they don't understand or they choose not to understand. There's nobody in the financial sector who believes this. They'd laugh at the proposition that $50 billion is enough to get you through the resolution process if a couple of firms go down. What we've heard time and again is that the challenge in a crisis is to buy enough time to keep the lights on for a few days till you get the FDIC in here. You could make it smaller. Corker and I spoke about $25 billion. But this is funded by the industry."

more...

http://voices.washingtonpost.com/ezra-klein/2010/04/sen_mark_warner_mitch_mcconnel.html

[LiberalFighter]

3. They need to break up the banks so if one bank fails it doesn't effect as many.

If they don't already do it they need to have different rules for "Wall Street Banks" and community type banks. Require higher insurance for accounts at "Wall Street Banks" and commercial type accounts.

They need to require banks to divest themselves of insurance and investment operations.

[Phx_Dem]

4. Dodd absolutely nailed them on the senate floor this morning!

It was a thing of beauty.

http://tpmdc.talkingpointsmemo.com/2010/04/game-of-chicken-democrats-and-republicans-square-off-over-regulating-wall-street-video.php