A Tale of Two Senators

I don’t know if you caught the story in the News Journal this morning featuring the work that Senator Kaufman is doing on financial reform.  He talks passionately about dismantling Too Big To Fail and reinstating much of the Glass-Steagall act.

By contrast, Tom Carper (the one we are stuck with) is already back-pedaling on important provisions of the bill.  And he isn’t alone.  Even the President is backing down on some of this.

What Carper is against, it seems, is making financial institutions (think AIG, Lehman and hedge funds)  pay for insurance.  Perhaps Carper had lunch with Mitch McConnell or something, but he is deluding himself if he thinks that Mitch is dealing in good faith here.  The insurance that the bill proposes is in the form of a $50B fund with money collected by banks and other financial institutions that is used to pay for financial institution funerals.  We never want to spend that money to send a bank or insurance out on a burning raft, viking-funeral style.  But if there is no money for it, guess who pays?  You and me in the form of unplanned government expenditure.

Currently, if a company like AIG goes belly-up, the government doesn’t have resolution authority.  They can’t wind down the company in an orderly fashion and let the market buy their assets.  Instead, we have to cover the AIG losses or risk total financial collapse.  That is when we bail them out.

I’m not sure why Senator Carper is so damn willing to take banks and hedge funds at their word on this after the way that banks have behaved in a lax regulatory environment.  The banks can only be trusted to do what they can get away with.  If they can use the leverage of a total system failure to prevent their own failure, they will.  And apparently, Tom Carper is willing to let them do it in the name of bipartisanship.

Here’s what we can do, first call his office.  You know that the banks are going to have their people calling, so we have to make sure that Carper knows where the rest of us stand. Second, consider putting your name on this petition in support of the legislation.  Let Carper and the rest of the Congress know that this isn’t OK.  We can’t let the US Chamber of Commerce get their claws into our elected officials.