The White House's renewed push for financial reform this week was met by resistance in the form of Senate Republican Leader Mitch McConnell, who said in a statement Tuesday that the current Senate bill doesn't end taxpayer-funded bailouts but institutionalizes them. The Obama administration fired back later in the day, accusing the bill's opponents of distorting the truth.
‘Everybody agrees on the need to protect taxpayers from being on the hook for future Wall Street bailouts. This bill would all but guarantee that the pattern continues,’ McConnell said. He also faulted the legislation for giving the Federal Reserve too much lending authority and for overly empowering the FDIC and the Treasury Department in liquidating troubled financial institutions. McConnell said the bill gives the government a "backdoor mechanism for propping up failing or failed institutions."
"[T]his bill would provide endless protection for the biggest banks on Wall Street," McConnell said. "It also directs the Fed to oversee 35 to 50 of the biggest firmsâ�¦. If you thought Fannie and Freddie were dangerous, how about 35 to 50 of them?"
White House Deputy Communications Director Jen Psaki offered a retort Tuesday afternoon. In a blog posted on the White House Web site, Psaki noted that the bill "explicitly mandates that a large financial firm that faces failure will be allowed to fail, and it explicitly prohibits the use of any funds to "bail out' a failing firm."
The Senate bill also calls for a new $50 billion fund, which would be paid for by the largest financial firms and be used to wind down "too big to fail" institutions.
"Under the Senate bill, the taxpayers will never be asked to foot the bill for Wall Street's irresponsibility," Psaki wrote.
She additionally linked McConnell's rhetoric to a widely dispersed January polling memo titled "The Language of Financial Reform." The memo, authored by pollster Frank Luntz of Virginia-based consultancy The Word Doctors, stated, "Frankly, the single best way to kill any legislation is to link it to the Big Bank Bailout."
"No matter what the bill actually does, [its critics] are going to call it a bailout, because that's what the polls tell them to do," Psaki wrote.