Republicans in the Senate agreeing to allow debate over a financial reform bill is an interesting development in what could amount to a reform of the financial sector not see in this county in roughly 80 years.
While the Republicans seem to have conceded the removal of the permanent $50 billion bailout fund from the Sen. Chris Dodd (D-Conn.) authored Restoring American Financial Stability Act of 2010, there are other items on the Republican wish list for financial reform. It remains to be seen which of these items will be heard and agreed upon. Debate in the coming days will offer an interesting litmus test of which way the wind is blowing in the Senate.
Perhaps Republicans were too quick to allow debate over the bill once the popularly contentious bailout fund was removed because reports indicate that most Americans favor some kind of reform of the financial sector, blaming a lack of attendance to the practices there for the housing bubble burst and the subsequent overall recession.
Or, perhaps they recognized that healthy debate over the subject—in light of the Democrat-threatened and unprecedented overnight Senate session—was the only recourse against the aggressive push for legislation of which this administration is so fond. Either way, they are ready to talk. But what the Republicans desire from reform and what they’ll agree to in debate may prove to be radically different.
Republicans have been shopping around their own version of a reform plan. In light of recent events, it is safe to assume elimination of the bailout fund was undoubtedly among the most-desired aspects of their plan. But reports also indicate they Republicans have serious reservations about the massive new bureaucracy planned around consumer protection services, known in the Dodd bill as the Bureau of Consumer Financial Protection.
While it’s reasonable to wonder where the extra $50 billion would be pulled from as bailout protection—corporations, after all, don’t pay taxes and, instead, offset those costs to the consumer, it is also reasonable to wonder who would pay for the creation of a brand new bureaucracy that, for the most part, would spend its time doing work other agencies already do. In fact, it would be one huge and costly redundancy.
Considering the operating costs for yet another large bureaucratic agency payroll costs, healthcare office space, etc. the overhead would be enormous even if the size of the agency were fairly small by federal standards. It’s no secret that federal employees are now making more than many of their private industry counterparts.
So, in effect, the taxpayers could add those costs into what they already pay into the federal coffers. And, as mentioned, many of the actual tasks this new agency would assume are already being handled by other, pre-existing agencies.
There are other areas that Republicans may hold out for, including the portion of the bill that allows the Treasury Department to unilaterally and autonomously swing wide the doors of a private enterprise and force it to close shop. This represents an intrusion into the private business—and, indeed—lives of the citizenry that is at once repulsive and not a little frightening. Ultimately, it could mean that political preference or pull means the difference in success or failure of one’s enterprise. The free market would cease to exist under such conditions.
Rectification of these issues may be what allows the Republicans final concession on financial reform. Only time will tell. But they will do a great disservice to their constituency, their principles and the foundation of their country if they allow a bill to pass that does not address the role government supported entities—Fannie Mae and Freddie Mac specifically—played in the distortion of the market that led to the bubble bursting on Wall Street. Hopefully those faithfully elected conservatives will remember why the people of this country sent them to The Hill and will act with the American people in mind.
Sarah Lee is an Atlanta native and freelance writer living and working in Washington, D.C.