Against Bailouts, Rhetorically
Yep, they're all against "bailouts." Ron Paul decries the "benefits" from "all the bailouts due to the monetary system." Jon Huntsman, the only candidate on the stage last night at Oakland University (debate transcript, here) in Rochester, Michigan who did not flunk Economics 101, is worried that the continuance of 'too big to fail' might lead to another bailout.
Michele Bachmann criticized the requests of Fannie Mae and Freddie Mac for billions in a "bailout," blissfully unaware that when a public corporation run entirely by the government prior to 1969, the two agencies were effective and efficient. Mitt Romney- in Michigan!- said the auto bailout "was the wrong way to go." Saving American jobs does not win favor with the man who made part of his fortune at Bain Capital eliminating them.
Rick Perry, who has run Texas state government as a pay to play operation, vowed that he is "not going to pick winners and losers." Rick Santorum reminded his colleagues "time and time again, Wall Street, the Wall Street bailout, five of the eight people on this panel supported a Wall Street bailout. I didn't." Unfortunately, Santorum's preference for ending "government intervention in the marketplace" would encourage a reprise.
Even one of the debate hosts got into the act, with CNBC's personal finance correspondent Sharon Epperson worrying about "student loan debt becoming the next bailout."
If you believe these Republicans consider prevention of avoiding the temptation of another bailout a high priority, I have some prime Greek debt to sell you (cheap shot there; go, Athens!). Tax cuts for the wealthy have been joined by ridicule of the Dodd-Frank Wall Street Reform and Consumer Protection Act as tenets of GOP gospel. The best rehearsed line of the night may have been from Herman Cain when he maintained there are three things wrong with Dodd-Frank, mentioning one, then quipping "the two other biggest problems with Dodd/Frank: Dodd and Frank."
Everyone laughed, including the 80% of the audience which doesn't know what was in the legislation, and the remaining 20%, which doesn't understand it.
Though weakened by an onslaught of lobbying by Wall Street, the financial reform which culminated in Dodd-Frank makes the dreaded "bailout" less, rather than more, likely. In late September, CNNMoney reported
When Moody's downgraded three banks on Wednesday, it gave a big thumbs up to the Dodd-Frank Wall Street reforms that aim to ensure there won't be any more big bank bailouts.
Moody's made clear it believes that the U.S. government is less likely to step in to save a troubled bank,and downgraded Bank of America, Wells Farg oand Citigroup.
It is more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute," Moody's wrote in its downgrade note of Wells Fargo's stock.
Perry was not being presumptuous when last night he maintained "Everybody on this stage understands it's the regulatory world that is killing America."
"Everybody on this stage" (except, it would appear, Huntsman) is living on a different planet than both defenders and skeptics of the federal government's efforts to prevent another bailout.
At a meeting of the House Oversight Committee in January, the acting assistant secretary for financial stability at the Treasury Department maintained "Dodd-Frank gives us the tools to regulate any financial institution, regardless of its size, that poses systemic risks, and it gives us the tools to shut down such financial institutions." Demurring, Special Inspector General for TARP Neil Barofsky warned that federal officials "need to have the regulatory will and the political will to rein in the size of these banks." In his view, the Dodd-Frank Republicans imply is strangling businesses is not strong enough.
Six of the seven pretenders on stage in Michigan act as if they've slept through the last several years. If sincere, they are unaware, as Matt Taibbi has noted
We've just witnessed an episode of industry-wide financial mismanagement that surely has no parallel in history. From Lehman Brothers to AIG to Goldman and Morgan Stanley (which in 2008 needed the unprecedented emergency granting of a commercial bank charter to avoid bankruptcy) to Citigroup (which needed a $25 billion bailout and $300 billion in federal guarantees to survive) to Bear Stearns (dead) and Merrill Lynch (dead) and so on, virtually every single one of America's leading financial institutions from the last decade is either already out of business or functionally insolvent and living off government life support and cheap cash from the Fed.
And the GOP candidates have one solution, and one solution only: get government out of the way. The only hope is that they realize they're just making it up.