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Opinion - Editorial

Thursday, Apr. 15, 2010

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McConnell to big banks' rescue

FOXBusiness reported on Monday that Senate Republican leader Mitch McConnell recently called on about 25 Wall Street executives, many of them hedge fund managers, to hear their complaints about proposals for regulating the financial industry.

With him was Sen. John Cornyn of Texas, chairman of the National Republican Senatorial Committee, which raises campaign money for Republican candidates for Senate.

"The undercurrent of the gathering," FOX reports, "was undeniably political. ... McConnell and Cornyn made it clear they need Wall Street's help" to defeat the reforms by electing more Republicans in November.

On Tuesday and again Wednesday, McConnell took to the Senate floor to denounce a bill sponsored by Democratic Sen. Christopher Dodd, chairman of the Senate banking committee.

Interestingly, McConnell is disparaging the proposed reforms in words recommended by a pollster.

"If the outline of his speech sounds familiar," wrote Adam Sorensen on Time's political blog, "it's because it is the exact argument pollster Frank Luntz urged Republicans to make earlier this year in a widely publicized memo."

(Comparisons of McConnell's statements and the Luntz memo can be found at http://swampland.blogs.time.com/2010/04/13/a-gop-financial-reform-bellwether/.)

McConnell's statements are perfectly calibrated to inflame the public. He insists the bill would "allow endless taxpayer-funded bailouts for big Wall Street banks."

Their resemblance to the truth is another matter.

The provision that McConnell claims would allow endless bailouts emerged from a bipartisan collaboration by Sens. Mark Warner, D-Va., and Bob Corker, R-Tenn.

Warner, who learned a thing or two about capitalism as a successful dot.com entrepreneur before becoming Virginia's governor, told The Washington Post: "It appears that the Republican leader either doesn't understand or chooses not to understand the basic underlying premise of what this bill puts in place."

The provision to which McConnell particularly objects creates an orderly process for letting "too big to fail" banks fail, at the industry's expense, without taking down the entire economy.

The losers would be the management and shareholders, not the taxpayers. So onerous would this process be for failing financial institutions, says Warner, that it would serve as a deterrent to reckless decision-making.

McConnell, it should be remembered, voted for the bailout of the big investment banks in the fall of 2008, when it was the only alternative to global economic meltdown.

We have read that the Republicans have a plan for financial reform, but McConnell isn't talking up any solutions, just trashing the other side's ideas with no respect for the truth.

While the intricacies of financial regulation are complicated, McConnell's calculus is pretty obvious.

The high-stakes gamblers on Wall Street, luxuriating again in big bonuses, don't want any new oversight or regulation. Why would they, knowing that the government would have to bail them out again if their trading of worthless financial instruments goes bust and threatens to bring on the next Great Depression?

McConnell, unabashedly courting Wall Street bankers for political money, is happy to scratch their backs if they'll scratch his.

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