The Republican Party is showing some starch by standing up to Sen. Harry Reid on the financial regulation bill. We can only hope that they keep it up.
The Obama administration is selling a bill of goods inside the Beltway by saying that the GOP is getting into bed with the worst of Wall Street by opposing its bill. The truth is that the rest of the country fears big government a lot more than they fear big business and recognizes that Goldman Sachs and the other Wall Street giants feed at the Democratic trough as much or more so than at the Republican one.
Republicans just need to keep pointing out that Goldman was the biggest donor to the Obama campaign, contributing $970,000 from its employees and PACs. (The combined donations of the staff and faculty of the University of California totaled $1.5 million, but they are hardly a coherent corporate entity like Goldman.)
The financial regulation bill is a disaster in three major respects:
First, it gives incentives for irresponsibility by, in effect, guaranteeing banks’ survival by establishing a $50 billion rescue fund. In doing so, it gives the large banks a huge advantage and extends to them the same kind of implicit guarantee that once encouraged the likes of Freddie Mac and Fannie Mae to go on their lending spree. It is a key step in the conversion of big banks into quasi-public institutions, ultimately controlled by the government — levers through which the public sector can control the private.
Second, by vesting the secretary of the treasury with the power to seize — in a hostile takeover — any financial institution he deems to be too big to fail, it puts at risk of public takeover every such company in the nation.
Granted, the FDIC now has the power to seize any bank. But the FDIC is headed by a nonpartisan board with a heritage of nonpolitical regulation. The secretary of the treasury is an arm of the president.
If a political appointee has the power to take over any financial institution — bank or non-bank — fire the board, replace the management, wipe out stock equity and sell off pieces of the company, it gives him a power that is so awesome that it can undermine our democratic freedoms. What corporate executive will feel free to donate to Obama’s opponents or to speak out against the administration when doing so could cost him his job and his bank?
Third, the newly established Consumer Financial Protection Agency will have the power to approve or reject any loan instrument offered by any company in the land. A mattress company that wants to let customers go for 60 days before paying will have to get CFPA approval before extending credit. The bureaucratic bottleneck will slow economic activity, encourage corruption and retard consumer spending. It will be big government at its worst.
The entire political premise of the Obama administration’s efforts to pass this bill is flawed: Republicans will not be blamed for protecting the banks if they vote down this bill. Voters will not believe that the GOP is in cahoots with Wall Street. They will understand that the Republicans in Congress protected them from the massive growth of government.
Obama’s power grabs have been so frequent and so blatant that he has no credibility on this subject. Voters expect him to be fighting to grow government and to be hostile to private enterprise. And they are wise to his close connection with Wall Street despite his occasional forays into populism.
This is a bill the Republican Party can kill with political impunity, and hopefully they will have the courage to do so.