ALG Calls On Senate to Start Over With New Legislation “Addressing Root, Government Causes of Financial Crisis”
April 30th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today condemned Senator Majority Leader Harry Reid and Senators Chris Dodd and Barbara Boxer “for leaving in place the potential for unlimited government takeovers and bailouts paid for by the American people through assessments levied upon financial institutions via the Dodd bill.”
ALG today updated its comprehensive backgrounder, “Down a Rabbit Hole,” on the imminent danger this legislation represents, and to include what Wilson said was “the precise mechanism for the bailout authority. Under the Dodd-Lincoln and Boxer amendments, the government can still seize any institution it wants, and then keep it, reorganize it, or redistribute it without any Congressional approval,” Wilson declared, urging Senate Republicans to filibuster the measure.
According the ALG backgrounder, “Conceivably, when the FDIC seizes a company, it could use the Fund to fully pay back all outstanding liabilities to the company’s creditors, turn the company into a bridge financial company, fully recapitalize it with financing from the Fund, and then sell the capital stock to those very same creditors that were bailed with the Fund.”
The backgrounder continues, “That’s a bailout, and neither the Dodd-Lincoln substitute amendment nor the Boxer amendment would remove any of these provisions.”
“Senate Democrats have lied to both the American people and Senate Republicans about the removal of the bailout provisions in the bill. They’re still contained in the Dodd-Lincoln substitute, and the Boxer amendment does not remove those provisions, either,” said Wilson.
“Senators Dodd and Boxer are misleading the American people,” Wilson continued. “The Boxer amendment is meaningless, because the allegation is not that the American people will pay for these bailouts and takeovers via income and other taxes. It is that the American people will pay for these government takeovers and bailouts through higher costs on financial transactions and other fees levied by the financial institutions.”
Wilson continued, “The FDIC under the bill can still levy unlimited assessments on the financial institutions, leaving anyone who uses the financial system to pay for it with higher costs.”
Wilson said Boxer’s amendment to require that the assets of companies put into receivership are “liquidated” was also “meaningless, because under the orderly liquidation fund, the FDIC has unlimited capacity to either sell seized companies to the Treasury, to reorganize them, or to be redistribute their assets to politically-favored entities.”
On April 29th, Senator Dodd assured his colleagues that the bill did not contain bailouts, but that he would accept an amendment from Boxer affirming his position. Dodd said that he shared others’ “determination that we never again have institutions that become too big to fail, with that implicit guarantee that the government will bail them out. I’m satisfied that our bill does that already… I know my colleague from California, Barbara Boxer, has some ideas on this as well, she has raised… that I think can help get us there.”
Senator Boxer on April 30th, as she submitted her amendment, agreed with Dodd that her amendment was unnecessary. “When I heard my colleagues on the other side say Senator Dodd’s bill would ensure taxpayer bailouts, I knew it was false, and I went to Senator Dodd and colleagues on the committee and said I did not understand why these comments were coming from the other side, as if saying this glass of water on my desk is a cup of coffee. No. This glass of water is a glass of water. It is not coffee. And if you say seven, eight, and nine times that it is coffee, somebody might believe it.
Boxer continued, “That is how I view the comments from the other side that this is guaranteeing bailouts, when in fact it is not.”
Wilson asked, “If the Dodd bill does not contain bailouts, then why is Boxer trying to submit an additional amendment to affirm that position?”
Wilson said, “Provisions in this bill that create a $50 billion revolving ‘orderly liquidation fund’ and the creation of ‘bridge financial companies’ give the government unlimited authority and resources to seize companies and either nationalize, bail out, or redistribute their assets to favored political classes, in spite of the Boxer’s hollow amendment.”
“The Dodd-Lincoln and Boxer amendments do not eliminate bailouts and government takeovers, they institutionalize them for all time,” Wilson concluded.
“’Down a Rabbit Hole:’ The Threat Posed by the Dodd Bill to the Private Sector,” April 30th, 2010, Americans for Limited Government.
Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.
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