I’m eager to read a thoughtful response to Phil Swagel’s excellent piece in The American on the Dodd bill:

A particularly misleading claim from the administration is that the bill is not a bailout because any losses would be recouped through taxes on banks after the fact. The intervention itself is the essence of the bailout, not whether there are losses to the government. Imagine if the Troubled Asset Relief Program was to end up with a profit—not just recouping the money put into firms over the past two years but actually making a return for taxpayers. No one would suggest that the TARP is then somehow not a bailout. Recouping funds after the fact might be a good way to protect taxpayers, but it is preposterous to claim that this makes the Dodd bill anything other than a bailout. The ability of the government to put money into a failing firm and make payments to counterparties at its discretion is what makes the Dodd proposal a permanent bailout authority, not the issue of who pays after the fact.

Swagel goes on to describe reforms to the bankruptcy process and legislative checks on emergency lending to financial institutions. His basic argument is that Republicans and Democrats are close to a workable compromise, but that the non-bank resolution authority proposal in the Dodd bill poses serious risks.

This reminds me of a related matter. In the NYT, David Herszenhorn reports that Senate Republicans are working on an alternative financial reform bill, and he raises a sticking point.

Republicans also said they would propose regulatory language aimed at the giant mortgage entities, Fannie Maeand Freddie Mac, which for practical purposes are now wholly controlled by the federal government. Some Republicans say the absence of the mortgage giants from the financial regulation bill is a glaring omission, while Democrats say they need to be dealt with in separate legislation.

Given that non-bank resolution authority is the key sticking point, would it make sense to pass a narrow bill focused on reforming derivatives regulation? And if not, why not?