The Corner

Too Big to Work

The banking bill, “as it exists, now, is a change in our philosophy as a country,” Alabama congressman Spencer Bachus, ranking member of the Financial Services Committee, warned this afternoon.

In a small session with journalists, House Minority Leader John Boehner explained that the financial legislation the White House is insisting on will “create a permanent bailout structure for who they see fit.” (He called it “TARP Forever” in an oped piece today.)

“If you’re big and they believe that you pose a systemic risk, you’re getting an implicit guarantee.” Besides giving bureaucrats broad authority, they’re putting regional institutions “at a disadvantage.” The bill, Boehner said, “institutionalizes and makes permanent too big to fail.”

Democrats are saying just the opposite, of course.

Jeb Hensarling, Republican of Texas, pointed out that “for the most part, the people who are saying there is no bailout are the same people who said there would be no bailout of Fannie and Freddie.”

Boehner also pointed out that Democrats ignore, in their legislation, a “root cause” of the financial crisis: Fannie Mae and Freddie Mac. Bacchus further points out that they “can’t make the claim” that they are “addressing Fannie and Freddie,” because they’re not. “I will be very disappointed by my Senate colleagues if they don’t have something to address Fannie and Freddie” in the bill, Bacchus said.

“They have all this language in there that allows them to spend all the money they need,” Boehner said. What was once “emergency” move has “morphed into a revolving bailout slush fund for the administration” with this bill, Hensarling continued.

Bacchus pointed in particular to Section 204 of the current Senate bill where funds for the “ORDERLY LIQUIDATION” of a corporation that is deemed a systematic risk are so vague as to suggest they’re unlimited, Bacchus pointed out.

 

Having proposed a reform of their own — which does address Fannie and Freddie — House Republicans are aggressively pushing back against the White House, Chris Dodd, and Barney Frank, especially since Republicans believe their alternative would provide reform and transparency without adopting a “command and control philosophy,” as Bacchus put it.

The philosophical point seems to be one that Republicans hope will resonate: This is a comprehensive plan (again) that represents a fundamental shift (again) in governance. It’s another anti-market scheme that relies on the government providing assurances it’s got no business providing and can’t guarantee.

And while Treasure Secretary Geithner suggests that the White House is willing to give in on paring down the bailout fund, that’s only because he’s willing to wait and get the fund later — “they’ll spend the money and then they’ll raise the money,” Bacchus said.

The parallels to the health-care debate are hard not to make. Then, as Boehner recalled, the president would say things that were “just not true.” Now, in addition to trying to mislead on the bailout bill, the president “has been trying to wrap Wall Street around our necks. Yes, everyone is mad at Wall Street.” But Boehner believes that the White House is missing a key source of their anger: They’re mad at the federal government, too. And, he believes, maybe more.

The more the federal government owns, the more it’s where the buck stops and the blame begins.

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