Democrats' Financial Reform Looks Like a Protection Racket

Republicans have an opportunity to stand on the side of small businesses and community banks and take the high road.

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By Mary Kate Cary, Thomas Jefferson Street blog

If you can only read one article on the Dodd financial reform bill, read this guide to what the legislation proposes and what it doesn’t propose in today’s Washington Independent. It’s the most understandable summary I’ve read anywhere. Republicans would be smart to introduce amendments to it such as Rep. Ron Paul and Sen. Chuck Grassley’s proposals to audit the Fed, whose books are holding over $1 trillion in mortgage-backed securities from Fannie Mae and Freddie Mac, as well as toxic assets from Bear Sterns. They’d also do well with Sens. John McCain and Maria Cantwell’s planned amendment to re-introduce the Glass-Steagall provisions that were repealed in 1999, which outlawed banks from engaging in commercial and investment activities at the same time. My favorite is language that Republicans are urging to ensure there would be no more taxpayer-funded bank bailouts. 

Democrats are really playing games with this bill--shutting Republicans out of negotiations, as they did with the health care bill, then accusing them of being “obstructionists” afterward. But by offering some amendments that promote transparency and fiscal responsibility, Republicans have an opportunity here to stand on the side of small businesses and community banks and take the high road. And if they do take the high road, they won’t be running into the Democrats. Rich Lowry of the National Review points out that in the 2008 election cycle, when Goldman Sachs gave money to politicians, three-quarters of the time it was to Democrats. UBS and Citigroup did the same thing. Over at Politics Daily, Patricia Murphy points out, “We also know that Wall Street firms and their employees were three of President Obama's largest donors in 2007 and 2008, with Goldman's people giving nearly $1 million to help the president get elected.” And while Republicans aren’t completely clean when it comes to accepting campaign contributions from banks, Lowry lays out the Democrats’ new M.O.:

The more Washington does, the greater the need to protect yourself, and the greater the opportunities for profit. A writer for the Huffington Post reported on carve-outs in the financial-reform bill. ‘Obtaining a carve-out isn’t rocket science,’ a Republican financial-services lobbyist told the website. ‘Just give Chairman [Chris] Dodd and Chuck Schumer a [expletive denoting a lot] of money.’ That’s the Democratic appeal writ large. They are running a protection racket. No matter how bad a ‘reform’ is, it could be worse. This is how they bought off the drug companies in the health-care debate—by threatening worse. It is why the insurance companies were conflicted. Yes, they were maligned. But they’d live to fight another day, and in the meantime, the government would mandate that people buy their product. The entanglement of business and government is potentially lucrative for both sides.

So the Democrats can threaten anything from ‘reforming’ to nationalizing an industry, and then collect a boatload of money from frightened corporate executives who want a “carve-out.” It’s like something out of The Sopranos. In the immortal words of Silvio Dante, as he collected his protection money, “You’re only as good as your last envelope.”

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