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As Congress returns from spring break, the Senate is getting ready to take up the financial reform bill that contains financial-industry watchdog Elizabeth Warren's big idea: the Consumer Financial Protection Agency.
The House passed its version in December, much to financial industry lobbyists' dismay. Now they are focused on torpedoing reform in the Senate.
The key talking point reform's opponents are using to try to sink the bill is that it represents a "bailout."
Thus, on Tuesday on Fox News, Congressman Mike Pence, Republican of Indiana, referred to the bill as a "permanent bailout."
And, in a speech today on the Senate floor, Senate Minority Leader Mitch McConnell declared: "The American people have been telling us for nearly two years that any solution must do one thing - it must put an end to taxpayer funded bailouts for Wall Street banks. This bill not only allows for taxpayer-funded bailouts of Wall Street banks. It institutionalizes them."
Pence and McConnell are borrowing those lines straight from Frank Luntz, the Republican pollster who wrote a memo, leaked to HuffingtonPost, advising Republicans to tar all efforts to regulate the financial industry as more "bailouts."
As I write in the cover story in the forthcoming issue of The Progressive, Republicans and the banks have taken that advice to heart, and are busy spreading disinformation about financial reform, especially in key states where members of the Senate Banking Committee and vulnerable Democrats are up for election in 2010.
Americans have such an ambivalent relationship with Wall Street, and the banks have such a long history of cozy relations with both political parties, that voters can easily be confused about the contents of financial regulatory legislation.
"One of the things about the financial industry that’s different from health care and other issues, is that on these other issues people have a relationship--they know their doctor, they deal with their insurer--and they feel more comfortable," says Heather Booth of Americans for Financial Reform. "The financial industry is a secret club. You don’t even know what words like 'derivatives' mean. If you put a scary ad out there, people think, 'Gee, maybe that’s true.'”
Public insecurity about financial issues creates a perfect opportunity for banks to hide wrongdoing and members of Congress who take their contributions to run for cover.
Americans for Financial Reform is one of a handful of groups that are trying to hold the big banks accountable, and to push members of Congress to support a reform bill with real teeth. While the group applauded Senate Banking Committee Chairman Chris Dodd for moving forward with the "Restoring American Financial Stability Act," and praised the consumer protections in the bill as well as the process for unwinding previously "too big to fail" banks when they collapse, it is also calling on the Senate to strengthen some aspects of the bill. In particular, the group opposes the bill's "council of regulators," which could overturn decisions made by the Consumer Financial Protection Agency, calls for more effective regulation of shadow markets and what it calls the "casino economy,” and the dismantling of so-called "systemically important" institutions that are so big they pose a major risk to the global economy.
To hear Mitch McConnell talk, you would think he agreed with those goals.
"We need to end the worst abuses on Wall Street without forcing the taxpayer to pick up the tab," McConnell said on the floor of the Senate. "The way to solve this problem is to let the people who make the mistakes pay for them. We won't solve this problem until the biggest banks are allowed to fail."
In fact, the Republicans' main target is the Consumer Financial Protection Agency. Rather than curtail the banks' power, they want to maintain the unregulated environment that allowed the last Wall Street collapse. That was the topic of a meeting last week in New York City between McConnell, Senator Jon Cornyn, Republican of Texas, the Republican Senatorial Committee chair and chief fundraiser, and a group of hedge fund managers. Along with killing reform, Cornyn and McConnell discussed the importance of Wall Street funding for a Republican takeover of Congress.
The irony is, if the Republicans achieve that goal, it will be fueled by a combination of populist resentment of the big banks and a big influx of Wall Street cash.
Ruth Conniff is the political editor of The Progressive magazine.