Bankers Get $4 Trillion Gift From Barney Frank
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Alert: To close out 2009, I decided to do something I bet no member of Congress has done -- actually read
from cover to cover one of the pieces of sweeping legislation bouncing around Capitol Hill.
Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this
month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of
Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from
too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from
greedy lenders.
I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the Wall
Street Reform and Consumer Protection Act is a real slog. And yes, I plowed through all those pages.
(Memo to Chairman Frank: system at line 14, page 258 is missing the first's.)
The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At
least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.
If you're a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage
by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue
banks and Wall Street if the need arises.
Nuggets Gleaned
Here are some of the nuggets I gleaned from days spent reading Frank's handiwork:
-- For all its heft, the bill doesn't once mention the words too-big-to-fail, the main issue confronting the
financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward
recovery.
-- Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4
trillion in emergency funding the next time Wall Street crashes. So much for no-more-bailouts talk. That is
more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes
in the Senate's health-care bill look minuscule.
-- Oh, hold on, the Federal Reserve and Treasury Secretary can't authorize these funds unless there is at
least a 99 percent likelihood that all funds and interest will be paid back. Too bad the same models used to
foresee the housing meltdown probably will be used to predict this likelihood as well.
More Bailouts
-- The bill also allows the government, in a crisis, to back financial firms debts. Bondholders can sleep easy
-- there are more bailouts to come.
-- The legislation does create a council of regulators to spot risks to the financial system and big financial
firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.
-- Don't worry, this time regulators will have better tools. Six months after being created, the council will report
to Congress on whether setting up an electronic database would be a help. Maybe they'll even get to use that
Internet thingy.
-- This group, among its many powers, can restrict the ability of a financial firm to trade for its own account.
Perhaps this section should be entitled, Yes, Goldman Sachs Group Inc., we're looking at you.
Managing Bonuses
-- The bill also allows regulators to prohibit any incentive-based payment arrangement. In other words,
banker bonuses are still in play. Maybe Bank of America Corp. and Citigroup Inc. shouldn't have rushed to
pay back Troubled Asset Relief Program funds.
-- The bill kills the Office of Thrift Supervision, a toothless watchdog. Well, kill may be too strong a word. That
agency and its employees will be folded into the Office of the Comptroller of the Currency. Further proof that
government never really disappears.
-- Since Congress isn't cutting jobs, why not add a few more. The bill calls for more than a dozen agencies to
create a position called Director of Minority and Women Inclusion. People in these new posts will be
presidential appointees. I thought too-big-to-fail banks were the pressing issue. Turns out it's diversity, and
patronage.
-- Not that the House is entirely sure of what the issues are, at least judging by the two dozen or so studies
the bill authorizes. About a quarter of them relate to credit-rating companies, an area in which the legislation
falls short of meaningful change. Sadly, these studies don't tackle tough questions like whether we should
just do away with ratings altogether. Here's a tip: Do the studies, then write the legislation.
Consumer Protection
-- The bill isn't all bad, though. It creates a new Consumer Financial Protection Agency, the brainchild of
Elizabeth Warren, currently head of a panel overseeing TARP. And the first director gets the cool job of
designing a seal for the new agency. My suggestion: Warren riding a fiery chariot while hurling lightning bolts
at Federal Reserve Chairman Ben Bernanke.
-- Best of all, the bill contains a provision that, in the event of another government request for emergency aid
to prop up the financial system, debate in Congress be limited to just 10 hours. Anything that can get
Congress to shut up can't be all bad.
Even better would be if legislators actually tackle the real issues stemming from the financial crisis, end
bailouts and, for the sake of my eyes, write far, far shorter bills. (Bloomberg)
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DEMS BRACE FOR VOTER BACKLASH ON HEALTH
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Alert: Democratic leaders are girding for a political war over the health care overhaul heading in to this year's
midterm elections, preparing strategies and raising funds to fend off attacks by Republicans eager to
capitalize on voter discontent.
Analysts from both parties predict the sweeping impact of the proposed health care changes, which will
affect every American, to be the overriding issue, with the strongest and most personal impact in 2010.
Democratic leaders acknowledged this week in last-minute party fundraising appeals that they expect
Republicans to come out with both guns blazing in pursuit of major gains in the House and Senate.
"They will spend the next 11 months spinning our health care victory into a weapon and hitting us with it. We
might have the momentum now, but we must show the GOP and the pundits that we can sustain it until the
2010 elections," said Sen. Robert Menendez of New Jersey, chairman of the Democratic Senatorial
Campaign Committee.
"Now that they lost this battle, they will be focusing their fight -- and their millions and millions of dollars -- on
defeating us," he said.
National polls show strong opposition to the bills that have passed the House and Senate and now must be
reconciled in a conference committee before facing a final vote. Polling data compiled by the Senate
Republicans' campaign committee shows that Democrats are trailing their Republican challengers in every
battleground state where opposition is strongest.
In the House, between a dozen and two dozen Democrats who voted for the bill are on their party's
vulnerable list.
A Rasmussen poll conducted recently shows that Americans were opposed to the Democratic reforms by
55 percent to 40 percent, and think by a 54 percent to 24 percent margin that its enactment would make the
quality of medical care worse. "Those figures have remained fairly consistent for months," Rasmussen said
this week.
Democratic pollster Mark Mellman, in a strategy memo provided to Democratic senators last week, said the
reason for the health care plan's unpopularity resulted from "voters knowing little about the substance of the
plan" and the belief that those on the left remain unhappy with the Senate's decision to drop a
government-run health insurance option.
Whatever is in the ultimate bill that Congress sends to President Obama next month for his certain
signature, voters from all political persuasions will show their dissatisfaction at the ballot box, said health
care policy analyst Grace-Marie Turner of the Galen Institute, a free-market think tank opposed to the reform.
"If they have to wait until November, so be it. They haven't changed their minds about ObamaCare over the
last six months, and their opposition will get even stronger the more they learn about the details of the bills
the House and Senate have passed," Ms. Turner said.
But some independent political pollsters and elections analysts question whether the health care issue will
have staying power throughout next year since the health care legislation's provisions will not take effect until
2014 and since the economy likely will be the overriding concern for most voters.
"I think in the short term it will provide the Republicans with advantages in the sense that it will help
Republicans to continue to consolidate their base," pollster John Zogby said.
"But in the mid- to long term, it will provide a Democratic advantage because it will be done, and therefore
the debate will have lost its edge. Secondly, it will be seen as a step forward among those who are looking
for some sort of health care relief, even though the act does not go into effect for several years, and, third, it
allows Democrats to change the subject. The focus is likely to be on the economy and Afghanistan," Mr.
Zogby said.
"I think the issue will burn out and be a net advantage to the Democrats who will say at least they did
something," he said.
However, Jennifer Duffy, senior Senate elections analyst at the Cook Political Report, thinks it is still unclear
how the issue will play out next year and which party will benefit, and points to vulnerable Democrats such
as Sen. Blanche Lincoln of Arkansas, where opposition to the health care bills is strong. Mrs. Lincoln voted
for it anyway after getting $100 million for her state to offset Medicaid costs. Polls showed that Mrs. Lincoln
was trailing all four of her prospective challengers by three to six percentage points.
"I expect both parties to use health care. Republicans will take aim at Democrats sitting in swing or
Republican-leaning seats like Lincoln. It seems that Democrats want Republicans on the record saying that
health care should be repealed," Ms. Duffy said.
"The truth is that it is very hard to know how voters will react to the issue next fall. A vast majority of voters are
still waiting to see what the legislation does and how it affects them. When that becomes clear, then they will
make a final assessment about whether they are happy with it," she said.
A National Republican Senatorial Committee (NRSC) polling matchup of Democratic senators who face the
voters next year and who backed the health care bill that passed the Senate on Christmas Eve showed last
week that a number of these Democrats were in trouble.
In Colorado, for example, Sen. Michael Bennet was trailing his Republican rival by 37 percent to 46 percent.
In Connecticut, Sen. Christopher J. Dodd was running well behind the Republican front-runner, 44 percent to
38 percent. In Nevada, Majority Leader Harry Reid, who crafted the bill that passed the Senate, was running
behind his likely challenger by 49 percent to 43 percent.
"Not coincidentally, in these states, including a few blue states, where more voters disapprove than approve
of the Democrats' health care bill, it's the GOP candidate who is leading in the head-to-head polls," NRSC
spokesman Brian Walsh said. (The Washington Times)
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