Does Mike Castle Oppose The FDIC Too?

Last week the U.S. House passed an ambitious financial overhaul package. The vote count was 223-202, with some Blue Dogs voting with all Republicans (including Mike Castle) against the bill. Mike Castle released this statement about his vote:

“Since the financial crisis began, I have worked with my Republican and Democrat colleagues in the House of Representatives to bring stability to the financial marketplace, and to guarantee that Americans no longer pay for the mistakes of financial institutions,” said Rep. Castle.

Rep Castle continued: “Although I have voted for several provisions set forth in this bill — including greater scrutiny of the hedge fund industry, reforming our credit rating agencies, cracking down on predatory lending, auditing of the Federal Reserve, and enacting greater transparency of the financial marketplace — this bill falls short of ensuring taxpayers that they will not be called upon yet again to bail out financial institutions.”

H.R. 4137 makes permanent the bailout policies used to prop up AIG, Fannie Mae, Freddie Mac, and other “too big to fail” institutions; establishes a new federal agency in the executive branch to regulate financial products and services; and enables the federal government to make determinations regarding wage controls on private sector employees. The bill is estimated by the Congressional Budget Office to cost $4.5 billion, which is being taken from unused TARP funds. Unspent TARP funds were legislated to be directed to deficit reduction, not used as Congressional offsets.

The provision Castle is discussing is this one, which the banks oppose:

The bill would create, at a cost that could run into the billions, a Consumer Financial Protection Agency in an attempt to head off the kinds of lending practices that led many homeowners to take on mortgages they could not afford.

The bill would bring regulation for the first time to a portion of the over-the-counter market for derivatives. It would create a process for dealing with troubles at very large financial institutions that might pose a risk to the financial system and the economy, and require large firms to contribute to a fund to help with an orderly dissolution of those institutions if they are in danger of failing.

And the bill includes a number of other provisions to address executive compensation, investor protections and regulation of hedge funds.

This provision of the bill is meant to address some weaknesses encountered during the recent financial crisis: too big too fail and non-bank financial institutions. The bill creates a type of insurance along the lines the FDIC. The big institutions pay money into this insurance, which will be used to dismantle the institutions when they are failing and endangering the economy.

Mike Castle lives in the alternate universe inhabited by Republicans. In their universe, the financial crisis was caused by poor people, Fannie and Freddie. The big banks were just victims because they were forced to loan to poor people at huge profits to the banks. The Republicans believe that the solution to the crisis is to deregulate more, cut spending (except for wars) and cut taxes. I call it Hoover economics (because it worked so well when Hoover did it).

At this point I really don’t see a big difference between Christine O’Donnell and Mike Castle. Castle is taking this born-again Republican purity seriously.