Washington Post asks: What's the Republican alternative to bailouts? (If you're against it)

Washington (Com)Post ^ | 04/14/2010 | Ezra Klein

[SeekAndFind]

"If there’s one thing Americans agree on when it comes to financial reform, it’s this," said Senate Minority Leader Mitch McConnell. "Never again should taxpayers be expected to bail out Wall Street from its own mistakes. We cannot allow endless taxpayer-funded bailouts for big Wall Street banks. And that’s why we must not pass the financial reform bill that’s about to hit the floor."

So much for that vaunted bipartisan cooperation, huh?

The Republican attack on FinReg is that it creates a "permanent bailout." This isn't a judgment on the Dodd bill. In fact, it long predates the Dodd bill. It goes back to a memo that GOP pollster Frank Luntz penned back in February. The subject? How to defeat financial regulation reform. "If there is one thing we can all agree on," Luntz said, "it's that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated." Note the echo in McConnell's remarks above. "Frankly," Luntz concluded, "the single best way to kill any legislation is to link it to the Big Bank Bailout."

So that's what McConnell does. But is it true? When compared to the status quo, absolutely not. The Dodd bill makes bailouts less likely by empowering regulators and increasing transparency, raises a $50 billion fund from banks to pay for future too-big-to-fail bankruptcies, and then makes the outcome a predictable punishment rather than a chaotic rescue. That last is known as "resolution authority" -- as bloodless a word as one could possibly imagine -- and it wipes out both shareholders and management. It's all there in Section 206 of the bill: "Mandatory Terms and Conditions for All Orderly Liquidation Actions." What we call "resolution" would better be described as "execution."

[Da Coyote]

Are they really that stupid?

Hello.....they’re journalists......

[pnh102]

Let them fail.

[Buckeye McFrog]

in the words of the late Pres. Gerald R. Ford, DROP DEAD!

[MNJohnnie]

This idiot contradicts their whole argument right in the second paragraph.

YES Washington Trash Porpagandist Klein, it DOES do exactly what Republicans are waring against. You just admited it.

raises a $50 billion fund from banks to pay for future too-big-to-fail bankruptcies,

[ClearCase_guy]

Democrat position #1: Wall St bankers are evil people that have destroyed the country.
Republican position #1: We should not use taxpayer funds to reward Wall St bankers who have destroyed this country.
Democrat position #2: Republicans are stupid, have no plan, and, by their refusal to rescue Wall St, are trying to destroy this country.

[MichiganConservative]

Let them fail. That is how the market works. Businesses that make stupid decisions and misuse their capital should fail.

Entrepreneurs who have better ideas and can manage better should then buy the valuable assets and try again.

That’s capitalism.

Propping up zombie banks or zombie auto makers is a mix of fascism and corporatism.

It is unnecessary and harmful government meddling in the economy that spreads general misery and woe.

[ctdonath2]

Alternative: fail.
Learn that you can’t stretch that far and expect someone else to clean up the inevitable mess.

[SharpRightTurn]

“Let them fail. That is how the market works. Businesses that make stupid decisions and misuse their capital should fail. Entrepreneurs who have better ideas and can manage better should then buy the valuable assets and try again.
That’s capitalism. Propping up zombie banks or zombie auto makers is a mix of fascism and corporatism. It is unnecessary and harmful government meddling in the economy that spreads general misery and woe.”

BUMP.

[MichiganConservative]

...raises a $50 billion fund from banks to pay for future too-big-to-fail bankruptcies...

"Too big to fail" is a lie.

[Mom MD]

Let em go under. Maybe the new companies that take their places will have learned something.

[Arrowhead1952]

The best thing that could happen is to keep bawney fwank and chris dodd off any committee that has a single thing to do with funding anything. Let the bad ones fail and the others will pick up the slack.

[depressed in 06]

I tend to agree with McConnell, if he can assure me that government will not cause failure. Until, Barney Frank and Chris Dodd are sitting in jail the government is responsible for these things. The taxpayer must understand that they are condoning this behavior by voting for these clowns. The sad fact is that to correct these crimes it is going to take some pain.

[Need4Truth]

It doesn’t matter what McConnell’s proposal is, the democrats aren’t going to consider it anyway. He might be better off not saying what it is. The democrats just attack whether he says what it is or not.

[E. Pluribus Unum]

Evidently WaPo only believes in evolution when it suits their agenda.

[Carley]

NO bank, NO brokerage firm is/was TOO BIG TO FAIL.

When President Ford told NY to DROP DEAD....he forced them to address their financial crisis.

By sending money to the states the money was simply prolonging the problem rather than addressing the problem.

Charlie Crist learned that the hard way.

NO BAILOUTS.........

[KarlInOhio]

If the share holders, directors and executives of a bank know that they will lose their stocks and their jobs when they drive a company into bankruptcy they will not act like the world is their casino with an unlimited credit line and a pit boss who is willing to ignore losing hands. All these proposed financial regulation will do is allow the banks big enough to get the wholesale discount on renting Congressmen (you can only rent a politician because they aren't honest enough to stay bought) to use it as a hammer against smaller banks. The big boys will be protected from both bankruptcy for their foolishness and from their competition.

[MichiganConservative]

That is the problem with government regulation in a nutshell. It pretty much inevitable leads to collusion between government and big players in the regulated industry. I think that’s called corporatism.

[The_Reader_David]

In a word: bankruptcies.

There is no such thing as “too big to fail”. The only bailout I ever saw any point to was AIG, because their core business was something no one else did. It probably should have been done differently—temporary government control with the legislation including a time-table for reprivatization, firing their entire hedge fund division, with criminal investigations against them, no executive bonuses during the restructuring (if you screw up that badly, you don’t deserve a bonus)—but that was it. Banks? There are other banks which can buy them out. Auto makers? Ditto, plus the union contracts that drove them into bankruptcy get canceled or restructured.

Bailouts prop up failing enterprises to the disadvantage of their competitors (again, the reason I thought AIG was an exception was there were no real competitors in their core business).

[FlingWingFlyer]

That is the correct answer. IMHO.