Emboldened by public anger at Wall Street, Democrats set the first key vote for Monday on a bill to rein in the financial industry — even though Reid lacks a bipartisan deal or any guarantee that he’ll get the crucial 60th vote needed to break a filibuster.
And if no Republican cracks, and the bill goes down, Reid is calculating that would be politically devastating for the GOP, because the party would appear to be standing shoulder to shoulder with the Wall Street bankers many Americans blame for the recession.
“We have the upper hand,” said New York Sen. Chuck Schumer, a member of the Senate Democratic leadership.
The problem is that this bill does not "rein in" the financial industry. What does it do? Well...
At the top of the list is the $50 billion fund that the Federal Deposit Insurance Corp could use to pay off creditors of firms identified as systemically risky -- i.e., "too big to fail."
"The Dodd bill," writes Democratic Rep. Brad Sherman, "has unlimited executive bailout authority. That's something Wall Street desperately wants but doesn't dare ask for."
Politically connected creditors would have every reason to assume they'd get favorable treatment. The Dodd bill specifically authorizes the FDIC to treat "creditors similarly situated" differently.
Second, as former Bush administration economist Larry Lindsey points out, the Dodd bill gives the Treasury and the FDIC authority to grant an unlimited number of loan guarantees to "too big to fail" firms. CEOs might want to have receipts for their contributions to Sen. Charles Schumer and the Obama campaign in hand when they apply.
Lindsey ticks off other special favors. "Labor gets 'proxy access' to bring its agenda items before shareholders as well as annual 'say on pay' for executives. Consumer activists get a brand new agency funded directly out of the seniorage the Fed earns. No oversight by the Federal Reserve Board or by Congress on how the money is spent."
Then there are carve-out provisions provided for particular interests. "Obtaining a carve-out isn't rocket science," one Republican K Street lobbyist told the Huffington Post. "Just give Chairman Dodd and Chuck Schumer a s---load of money."
More bailouts for billionaires:
But, as critics led by Kentucky's Sen. Mitch McConnell, have pointed out, the bill, sponsored by Sen. Chris Dodd, doesn't end "too big to fail" -- under any fair reading.
It says that failed financial firms must repay taxpayer money "unless the United States agrees or consents otherwise." It says, too, that Washington can bail out bondholders to financial firms as long as officialdom "determines that such payments or credits are necessary or appropriate to minimize losses."
This bill puts all taxpayers on the hook for billions of dollars for politically-connected businesses. This is crony capitalism at its worst.
The only way to restore sanity to the federal government is to repeal the 17th Amendment.