PolitiFact.com Smacks Down Sen. McConnell: "Bank Bailouts Not In Bill"
Pulitzer Prize-winning PolitiFact.com analyzed comments by Sen. Mitch McConnell claiming that the Senate's Wall Street reform bill "actually guarantees future bailouts of Wall Street banks." The site concluded, "McConnell is using seriously overheated rhetoric. Nothing in the bill 'guarantees' future bailouts of Wall Street banks. We rate his statement False."
PolitiFact Weighs In: Republicans Are Lying
Sen. Mitch McConnell said that new financial regulations under consideration in the Senate could lead to only one thing: bailouts.
"In fact, if you look at it carefully, it will lead to endless taxpayer bailouts of Wall Street banks," McConnell said at a press conference on April 14, adding that it "actually guarantees future bailouts of Wall Street banks" and that it sets up "in perpetuity the potential for additional taxpayer bailouts of large institutions."
The official name of that part of the bill is "Orderly Resolution Authority." It sets up a panel of three bankruptcy judges who convene and agree within 24 hours about whether a large financial company is insolvent. If a "systematically significant" firm is teetering on collapse, the Treasury, the Federal Deposit Insurance Corp. and the Federal Reserve would have to agree to liquidate the firm, using a special fund created with payments from the largest financial firms. The FDIC "shall impose assessments on a graduated basis, with financial companies having greater assets being assessed at a higher rate," according to the legislation.
In ruling on McConnell's statement, that financial reform "actually guarantees future bailouts of Wall Street banks," we base our ruling primarily on the legislation. It clearly states that the intention is to liquidate failing companies, not bail them out. To do that, it creates a fund with contributions from financial firms, not from taxpayer funds. We do not see any element of the bill that expressly permits ongoing, "endless" outlays from the federal treasury. Is it possible that liquidation may cost the government money, potentially more money than is allowed for in the bill? Yes. But even so, McConnell is using seriously overheated rhetoric. Nothing in the bill "guarantees" future bailouts of Wall Street banks. We rate his statement False. [PolitiFact.com, 4/2010]