RSC Update: Tuesday, April 20, 2010

From the Chairman

Senate Democrats hope to quickly pass financial regulatory legislation written primarily by Senator Chris Dodd (D-CT) before the American people truly learn what’s in it. The provision to receive the most attention thus far is a $50 billion fund for bailing out firms that Washington considers too-big-to-fail (read more here), but it is by no means the only part of the package that enables future bailouts.

First, it codifies the “back door” bailouts used by the Federal Reserve to pump money into Bear Stearns, AIG, Fannie Mae, and Freddie Mac. Democrats claim the Fed would have to distribute this money through broad programs rather than to specific firms, but the reality is more complicated. Just like the backroom deals in ObamaCare, the Fed could structure the supposedly broad programs with so many caveats and requirements that only one targeted firm would ever actually be eligible for the money. Talk about Washington picking winners and losers.

As happened with AIG, Washington could also force taxpayers to book huge losses while a failed firm’s creditors and counterparties recoup far more of their investments (potentially 100%) than they would get in normal bankruptcy proceedings.

The FDIC would be able to guarantee a failing firm’s debt obligations without limitation and without approval from Congress. The Secretary of the Treasury, meanwhile, is authorized to purchase this debt (again without limit). Since there is no requirement that a firm bailed out in this manner be dismantled, taxpayers could be forced to prop up favored zombie banks for as long as Washington finds it politically expedient.

For all of these reasons, the Dodd bill is a permanent bailout bill. House Republicans, on the other hand, have a solution that eliminates the notion that any financial institution is too-big-to-fail, ends the bailouts, improves the financial regulatory structure and strengthens consumer protections.

Sincerely,

Congressman Tom Price
Chairman, Republican Study Committee

RSC Media Activity – Republican Study Committee members work hard to ensure that the conservative viewpoint is well-represented in all corners of the media. Visit our Media Center for more.
· Rep. Robert Aderholt (AL-04): Time to Take Pain Out of Tax Day; The Gadsden Times, April 15.

· Rep. Eric Cantor (VA-07): The Great Tax Disconnection In Washington; Investors Business Daily, April 15.

· Rep. Mike Pence (IN-06): Washington Needs Fiscal Discipline; The Star Press, April 15.

Outlook – Here is a preview of upcoming Democrat proposals to advance their big-government, anti-taxpayer agenda.
· It is likely but not guaranteed that Senate Democrats will move to consider the Dodd financial bailout bill this week.

· The House is scheduled this week to consider the District of Columbia House Voting Rights Act. It would increase the number of House seats to 437, one of which would be a permanent voting seat for the District of Columbia. While Congress has the authority to control DC legislatively, it only can do so within the confines of the Constitution. Article I, Section 8, Clause 17 was created specifically so that our nation’s capital would not be a state or have the legislative function of a state. As a result, many conservatives argue that this bill is unconstitutional.

RSC Reports
· Each week, the RSC Budget and Spending Taskforce compiles a weekly report on the latest budget and spending news. Additionally, the RSC Money Monitor tracks how bills passed by the House affect authorizations, mandatory spending, and federal government revenue.