The Permanent Bailout Bill
President Obama is proposing a new bill to establish a permanent bailout fund. The bill proposes that this fund, run by unelected bureaucrats, will have the power to decide if banks and financial companies are in trouble and will have the authority to step in before problems become too bad.
The natural question is why the newly established fund should be any better than all the federal institutions we already have — none of which detected the last crises in time.
For more details, we turn to Republican House of Representatives Minority Leader John Boehner:
“Under his proposal, the largest Wall Street firms would become eligible for special treatment, including taxpayer-funded resources unavailable to smaller financial firms. These include exclusive access to a pre-existing bailout fund, a Treasury-backed line of credit and a government guarantee for any debt.
“Such perks will benefit the likes of Goldman Sachs, President Obama’s top financial contributor during the 2008 campaign and a firm that just happens to be under investigation by the SEC for defrauding investors.
“The decision to designate Goldman and other giant banks as ‘too big to fail’ won’t be made by taxpayers or their elected representatives. Under the Democrats’ plan, a new ‘Financial Stability Oversight Council’ made up of unelected federal bureaucrats — including representatives from the Treasury Department, the Federal Reserve, the CFTC, the FDIC and the SEC — would have absolute power to seize any company and do whatever it wants with it.
“That means Washington Democrats would force taxpayers to rely on the same government bureaucracies that were asleep at the switch the last time around. The commissioner of the SEC has warned that ‘there are no clear limits on the degree of government intervention that could be expected.'”
This sounds like all bad ideas wrapped into one single bill. More government, more runaway spending, more moral hazard for wall street banks. How will the US ever get away from too big to fail banks if we treat them differently from small banks? How will the banks learn from their mistakes if they can continue to borrow cheap money since the government backs their debt? And, how will the US ever get the debt under control if the government keeps throwing money around? Is it November yet? You can investors.com to read more about President Obama’s ‘TARP Forever’ Act.