Republicans spent much of the recess gaming out their strategic posture on the Democrats’ push to pass a major Wall Street reform bill, and it looks like they’ve finally settled on one: The GOP will oppose the proposed new regulations on the grounds that they will make future bailouts of big financial institutions more likely. And in adopting that line, they’ve taken a page straight out of the playbook of one of the conservative movement’s top message men.
“We cannot allow endless taxpayer funded bailouts for big Wall Street banks,” said Senate Minority Leader Mitch McConnell on the floor this morning. “That’s why we must not pass the financial reform bill that’s about to hit the floor. The fact is this bill wouldn’t solve the problems that led to the financial crisis. It would make them worse.”McConnell said the bill in question, authored by Senate Banking Committee chairman Chris Dodd, would “not only allow for taxpayer funded bailouts for Wall Street banks. It institutionalizes them.”
These are perhaps the Republican leadership’s strongest statement of opposition to the Democrats’ financial reform bill yet. But for those who followed the financial regulatory reform fight from its earliest days last year, these words might ring a bell. They come, almost verbatim, from a strategy memo authored by Republican strategist Frank Luntz.
“[A] vote in favor of creating a permanent bailout fund of private companies is like committing political hari-kari,” wrote Luntz early this year. “Frankly, the single best way to kill any legislation is to link it to the Big Bank Bailout.”
McConnell isn’t the only Republican to push this line. In fact, Sen. Richard Shelby (R-AL)–the GOP’s top regulatory reform negotiator–penned a letter to Treasury Secretary Timothy Geithner warning that the Dodd bill would make future bailouts ever more likely.
There are differences between the proposals Democrats have put forward to regulate Wall Street, and some experts think they could do a better job of preventing the need for future bailouts. But the Dodd bill imposes a fee on major institutions to create a $50 billion fund to be used to cover the fallout when Too-Big-To-Fail institutions when go bankrupt, and grants regulators the “resolution authority” to wind those institutions down.
What’s remains unclear is the extent to which Republican leadership will push all of its members into a similar stance of opposition. In the recent past, McConnell has been fairly successful at keeping his caucus in lockstep opposition to major Democratic initiatives. But Democrats understand that Wall Street reform is a potent political, and are hoping to goad a handful of Republicans into breaking a filibuster, and it’s not out of the realm of possibility that they’ll succeed–possibly with McConnell’s tacit assent.
We’ll keep a close eye on this. You can read the entire Luntz memo below.