Between a Rock and a Hard Place

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Well folks, there is still about another week or so at a minimum before I can resume something resembling a normal post frequency, but I found snippets of time here and there to draft up a condensed version of this for my regular column in our college newspaper, Student Life, and so it was relatively easy to find just a bit more time to expand it and say everything I wanted to say this time around.  On a side note, that’s one of the things I love about doing the blog: I get to set my own word limits.  Anyway, enjoy this one until I get back to a normal amount of posts for a given week, which is more inevitable than Senate Majority Leader Harry Reid (D-Nevada) being able to round up 60 votes to break a filibuster on a bill that has widespread appeal outside of Congress.

Wall Street reform: Democrats want it, Republicans want it, the American people want it, heck even the tea party activists even want it.  Therefore, it shouldn’t be such a problem getting a strong bill through Congress, should it? Well, as they say, the devil is in the details.  More specifically, there are two pieces about the proposal at the center of this debate: a new regulatory agency devoted to consumer protection and the so-called “resolution authority”, and a $50 billion fund financed by fees on big banks that would, according to CNN, provide a mechanism to pay for the orderly closing of a future Lehman Brothers-style failure.  Of course, the Republicans, most notably Senate Minority Leader Mitch McConnell (R-Kentucky), are opposing these provisions as vehemently as they opposed the Democrats’ approach to health care reform.  However, while the health care opposition could be considered legitimate, the Republicans need to step carefully in their opposition to financial reform, as the provisions drawing the most fire right now are the ones that this country desperately needs.

The Consumer Finance Protection Agency, as it is being called, would ideally be able to prevent banks from luring people into those sub-prime loans that caused so much trouble for the economy when they started to go south, causing the recession. Further, this agency, or an existing regulator, must be given the power to regulate the complex securities such as credit-default swaps that few people can truly claim to understand. Institutions that are Too Big To Fail, or TBTF, also need to be dealt with in a way that reduces the ability of these few companies to have a drastic effect on the economy should they get in trouble and face the risk of collapse. I can understand the desire to prevent another round of bailouts, but the Republicans’ constant repetition of this talking point even after it has been proven false just makes me wonder.

Republicans are alleging that the fund proposed is nothing more than ensuring that there will be another round of bailouts whenever companies need them. The Democrats leading the reform effort, from President Obama and Senator Chris Dodd (D-New York) on down, are all saying that this is not true at all, and I tend to believe them, only because you have to admit that Senator McConnell’s outright opposition to the reform bill was only announced after he met with several Wall Street bankers seems pretty suspicious to me. Sure, the GOP has traditionally been the party that favors a free-market economy, but isn’t being seen as in favor of the status quo on Wall Street the last thing a member of Congress wants with so much anger directed at these bankers?

Thus, McConnell and the rest of the GOP are in a bind; if they hold out on their position as steadfastly as they did on health care, it will be so easy to label them as being too friendly toward the very people who are being popularly blamed for the financial crisis. On the other hand, capitulate too quickly and too completely, or at all, depending on which activists you talk to, to the Democrats’ offering and they will be labeled as being soft and forsaking conservative principles. This label would be particularly effective with respect to the CFPA; Republicans under President George W. Bush created the Department of Homeland Security, one of the greatest big-government accomplishments of the past 50 years, and fears of that will certainly be brought up about the CFPA if they haven’t already.

Well, who didn’t see this coming?

Of course, on Thursday night as just about everyone thought would happen, the Republicans decided to prevent the Senate from beginning formal debate on the financial reform bill.  And also very predictably, the main points of opposition were, drum roll please, the liquidation fund and another provision, that actually was not the CFPA, though it is close to the matter.  Senator Jon Kyl (R-Arizona), in his remarks on the bill, claimed that it would “regulate your optometrist or your dentist”, or effectively any small business that allows for payment on an installment plan as the New York Times is reporting.

Memo to the GOP: can we please stop the blatant lies in Congress?  I am fairly confident in saying that I’m not alone in thinking that a more cooperative, honest minority party in Congress would be the exact thing this country needs.  Fortunately, outrageous statements like Senator Kyl’s are enough to keep the debate interesting, but still, I can tolerate the vicious levels of partisanship these days, but if there’s one thing I absolutely hate, it would have to be outright lies like the ones that are being spread.  At least this time, the Democrats are aggressively calling them out on the lies and misinformation, and trying to prevent a repeat of the ‘death panels’ that nearly killed health care reform.

On another note, there may still be hope for a bipartisan compromise.  According to another CNN article, the White House is apparently seriously considering asking Senator Dodd to remove the $50 billion fund from the bill. I would prefer that the fund remain in the bill, but if that’s the cost of a bipartisan bill, so be it. However, having a way to deal with Too Big To Fail effectively while minimizing risk to the taxpayers and the broader economy is absolutely critical to ensuring we do not have this debate again in ten years.

The Between a Rock and a Hard Place by The New Age of Politics, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.

Tags: bipartisanship, CFPA, Congress, Consumer Finance Protection Agency, financial reform, George W. Bush, GOP, Jon Kyl, liquidation fund, Mitch McConnell, Party leaders of the United States Senate, Politics, reform, Senate, TBTF, too big to fail, United States, United States Senate, Wall Street