Rep. Pence Spreads The Lie That Wall Street Reform Is A "Permanent Bailout"
During an April 13, 2010 interview on Fox News, House Republican Conference chairman Mike Pence (R-IN) repeated the Frank Luntz talking point that reforming Wall Street would result in a "permanent bailout." The bill does not bail firms out, but safely dismantles any failed financial company that threatens the stability of the entire economy. The dissolution fund is financed NOT by taxpayers, but by fees levied on financial companies.
Rep. Pence Spreads Debunked "Permanent Bailout" Lie
Rep. Mike Pence:
They got this financial services bill that is actually a permanent bailout bill. [Fox News, 4/13/10]
"Permanent Bailout" Line Is Straight From Frank Luntz's Pro-Wall Street Memo
Frank Luntz:
[Luntz, The Language of Financial Reform, January 2010]
Frank Luntz Represents A Myriad Of Wall Street & Financial Interests. According to Frank Luntz's companies, Luntz, Maslansky Strategic Research and The Word Doctors, his clients include:
Ameriquest Mortgage Company
American Express
Bear Stearns
Merrill Lynch
U.S. Chamber of Commerce
VanKampen Investments
[Luntz, Maslansky Strategic Research, accessed 2/1/10; Word Doctors Corporate Clients, accessed 2/1/10; Word Doctors Association Clients; accessed 2/1/10]
Hoping For Campaign Donations, Republicans Are Cozying Up To Wall Street. According to the Wall Street Journal:
Republicans are stepping up their campaign to win donations from Wall Street, trying to capitalize on an increasing sense of regret among executives at big financial institutions for backing Democrats in 2008.
In discussions with Wall Street executives, Republicans are striving to make the case that they are banks' best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street.
GOP strategists hope to benefit from the reaction to the White House's populist rhetoric and proposals, which range from sharp critiques of bonuses to a tax on big Wall Street banks, caps on executive pay and curbs on business practices deemed too risky. [Wall Street Journal, 2/4/10; emphasis added]
There Is No "Permanent Bailout" In House Or Senate Reform Bills
In reality, the House's Wall Street Reform and Consumer Protection Act does NOT provide for a "permanent bailout." The bill creates a "Systemic Dissolution Fund" that does not bail firms out, but safely dismantles "any failed financial company" that threatens the entire economy. The fund is financed NOT by taxpayers, but by fees "levied on financial companies."
The Wall Street Reform and Consumer Protection Act of 2009:
[HR 4173, The Wall Street Reform and Consumer Protection Act of 2009, accessed 4/5/10]
The Senate bill creates an "Orderly Liquidation Authority" that does not bail firms out, but safely dismantles "any failed financial company" that threatens the entire economy. The fund is financed NOT by taxpayers, but by fees levied on financial companies.
The Senate's Restoring American Financial Stability Act Ends The Risky Bailout Culture, Liquidates Failed Institutions. According to Section 204 of the Restoring American Financial Stability Act of 2010:
[Restoring American Financial Stability Act of 2010, accessed 4/7/10]
WSJ: Senate Bill "Would Make A Government Bailout Virtually Impossible." As reported by the Wall Street Journal: "A spokeswoman for the Connecticut Democrat said Friday he would change a provision that would have allowed the Federal Reserve to use emergency powers to lend to an individual 'financial market utility.' Only payment and clearing firms deemed 'systemically important' by a proposed council of regulators would have been eligible.... The change Mr. Dodd has agreed to would make a government bailout virtually impossible, though the government would be able to seize and dismantle failing firms." [Wall Street Journal via Factiva, 3/19/10]
Kudlow: "Dodd's Financial-Regulation Proposal Raises The Possibility Of Substantial Progress On The Road To Ending "Too Big To Fail" (TBTF) And Bailout Nation." In a column written for RealClearMarkets, Larry Kudlow wrote, "Sen. Chris Dodd's financial-regulation proposal raises the possibility of substantial progress on the road to ending "too big to fail" (TBTF) and bailout nation for banks and other financial institutions... First, under the Dodd scheme, large complex companies will have to submit plans for rapid and orderly shutdowns should they go under. These are called 'funeral plans.' Then, in terms of these orderly shutdowns, the bill would create an 'orderly liquidation mechanism for the FDIC to unwind failing systemically significant financial companies. Shareholders and unsecured creditors will bear losses and management will be removed.' Good." [Kudlow, RealClearMarkets, 3/16/10]
Washington Post: "The Bill Provides A Way To Rein In The Risks They Take With That Money, And Taxpayers Won't Be On The Hook If They Nevertheless Collapse." In an editorial written after the Senate released its plan to reform the financial system, the Washington Post wrote, "Like the House bill, it would authorize a council of regulators to name systemically risky institutions, limit their leverage and require them to pay into a $50 billion resolution fund that would deal with a big firm's collapse. To be sure, listing 'too big to fail' institutions only encourages the market to offer them artificially easy funding. But at least the bill provides a way to rein in the risks they take with that money, and taxpayers won't be on the hook if they nevertheless collapse." [Washington Post, 3/18/10]
