In a stunning display of either a lack of short-term memory or full-blown dementia, Congressional Republicans are taking the exact same losing playbook they used during the health care reform fight and are now applying it to the financial reform battle. Just as they did before, they have all latched on to a memo written by professional liar Frank Luntz, and are using it as their script. Ever wonder why most Republicans sound alike and repeat the same tired phrases? It’s because Frank told them to. The current favorite right-wing distortion has to do with what they refer to as the “$50 Billion Bailout Fund”. Doesn’t sound good does it? Good thing it doesn’t exist, then.
What they’re all talking about is a provision present in Chris Dodd’s financial reform bill. What it really is is the “orderly liquidation fund”, and here is how Ezra Klein describes it and its function:
A year after the bill is signed, the secretary of the Treasury begins taxing banks based on the risk they pose to the financial system. This tax must raise $50 billion and last for at least five years but no more than 10 years. So first, that’s where the fund comes from: a tax on too-big-to-fail banks, which has the added bonus of giving a slight advantage to smaller banks that won’t be laboring under this tax.
When it comes to saving failing banks, $50 billion isn’t a lot of money. Think of the $700 billion TARP fund. Or even look at the House bill, which has a $150 billion resolution fund. But then, the $50 billion isn’t there to save banks. It’s there to liquidate them.
Here’s the chain of events: A bank is judged failing. The FDIC submits a plan for the bank’s liquidation — which includes firing management, wiping out shareholders, handing losses to creditors, and selling off the firm — and gets it approved by the Treasury secretary. Then the FDIC takes over the banks. The $50 billion fund is used to keep the lights on while all this happens. It’s there to prevent taxpayers from having to foot the bill for the chaos that will occur between when we recognize a bank is failing and when we shut it down.
So, you can call it whatever you want. Call it the Eyjafjallajökull Fund if you want (that should shut Mitch McConnell up). The fact is that it is exactly not a bailout fund. To be clear, a bailout is what happens when a company is propped up, their losses are mitigated, and they are set up to continue on. The fund in question here is designed to do the exact opposite. As Klein states, “[I]t isn’t a bailout. It’s the death of the company. And the fund is way of forcing too-big-to-fail banks to pay for the execution.” Even Tennessee Republican Senator Bob Corker has begun to hit back against this lie.
As with the HCR debate and any others, it’s perfectly OK for different people to have different opinions on the issues. But, like the HCR debate, the Fin-Reg debate has already devolved into the dynamic of one side trying to solve real problems, and the other side distorting the facts in order to avoid a real debate. Of course, if I was in the position of having to defend the Wall Street giants, I probably would want to avoid reality as much as possible, too.