Senate Republicans said Tuesday that a three-paragraph amendment offered by a Democratic senator, which claims to prevent taxpayer-funded bailouts, is purely cosmetic and will have no real impact.
“I’m not trying to be offensive to Senator [Barbara] Boxer but hers is totally oratory,” said Sen. Bob Corker, Tennessee Republican, who has been heavily involved in negotiations to end the problem of having financial institutions that are “too big to fail.”
“It has no effect whatsoever on the legislation. It’s a cover vote, OK?” Corker said of the amendment, which was offered last week by Boxer, a California Democrat who is in the middle of a challenging reelection fight.
Sen. John Thune, South Dakota Republican, said the Boxer amendment is more like a “sense of the Senate” resolution.
“It doesn’t have the force of law and would not be binding,” he said.
Boxer, on the floor of the Senate, insisted that her amendment did in fact carry the force of law.
“We have a very strong amendment here that is not a sense of the Senate,” Boxer said. “It is real law.”
The amendment was headed for a vote late Tuesday or Wednesday.
Sen. Mark Warner, Virginia Democrat, simply said the Boxer amendment “reaffirms what’s already in the bill” and said he supported it.
Corker said Democrats and Republicans are working on how to give the Federal Deposit Insurance Corporation (FDIC) powers to take apart large banks or firms that come to the edge of insolvency, without encouraging increased risk-taking by Wall Street investors who see the FDIC powers as a form of a bailout.
Corker said that a key provision being worked on would address what happens after the FDIC gives creditors to a failed firm more money than they would have otherwise received in a normal bankruptcy.
“What you’re doing is you’re bridging somebody over and maybe you don’t want contagion, you don’t want it moving over to another firm,” Corker said.
He said the legislation being worked on would allow FDIC to “claw back” the amount creditors are paid back more than they would have received in Chapter 7 bankruptcy.
“So what you do is you come back over the fact and you true up and you make sure you’re getting that money back from those creditors,” Corker said.
Here is the full text of the Boxer amendment:
Purpose: To prohibit taxpayers from ever having to bail out the financial sector.
SEC. 212. PROHIBITION ON TAXPAYER FUNDING.
(a) LIQUIDATION REQUIRED.—All financial companies put into receivership under this title shall be liquidated. No taxpayer funds shall be used to prevent the liquidation of any financial company under this title.
(b) RECOVERY OF FUND. – All funds expended in the liquidation of a financial company under this title shall be recovered from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.
(c) NO LOSSES TO TAXPAYERS. – Taxpayers shall bear no losses from the exercise of any authority under this title.