You Had Your Chance, And YOU BLEW IT!

Simon Johnson on the Republican plan for financial reform:

At one level, it is good to see the Republican Senate leadership finally express clear positions on the financial industry and what we need in order to make it safer.  At another level, what they are proposing is downright scary.

In a Senate floor speech yesterday, Senator Mitch McConnell (Senate Republican leader) said,

"The way to solve this problem is to let the people who make the mistakes pay for them. We won’t solve this problem until the biggest banks are allowed to fail.”

Do not be misled by this statement.  Senator McConnell’s preferred approach is not to break up big banks; it’s to change nothing now and simply promise to let them fail in the future. 

What makes McConnell's plan not only foolish, but dishonest as well, is the fact that he has already had the chance to let these big banks fail, back in October 2008. So what did he do then?

He voted to bail them out!

The Republicans can talk all day long about how important it is to "let the market decide", and to let these banks fail, but what every single person with even a passing familiarity with the subject knows is that, when the United States Congress is faced with the choice of:

A) Allowing the financial industry to collapse, and doing nothing while tens of millions more Americans lose their jobs in what is sure to be a worse disaster than the previous one 

or

B) Voting to avert complete collapse by handing over trillions of middle class tax dollars to the very corporations which are funding their campaigns, and whom they hope to work for when they leave Congress

they sure as hell aren't going to let these banks fail. And the market knows this. Major Wall Street firms are getting funding at rates which reflects the fact that knowledgeable operators have zero doubt that our government will not let them fail. And Mitch McConnell knows this, too.

But what does he care? When taxpayers finally wise up after the next bailout, he'll probably still have 4 years left in his term, and then he'll just go make a hundred million or so "consulting" for Citibank or Wells Fargo like Robert Rubin did after his "public service" as Treasury Secretary.

I suppose he's doing it for the children. His children, that is.