Like the "death panel" charge, the accusation that financial reform is a "bailout bill" favored by Wall Street has an ingenious resilience. The truth is that governments will bail out financial firms if those firms are threatened with a failure that poses systemic risks. On top of that, you can't stop bailouts. Whatever rules are put into place, if a firm is about to take the economy over the cliff with it, whoever is running the government will find a way to get out a bungee cord.
The only answer to the dilemma is to try to prevent systemic failure from happening in the first place, which is the purpose of financial regulation. But this is the genius of the "bailout bill" charge. You can't honestly promise that any regulation, however well-designed, can guarantee that no bailout will ever happen again. And when you try to address the "bailout bill" charge on its own loopy terms, you wind up lending it credence. Here's Barbara Boxer trying to make it extra, super-clear that the bill does not provide for bailouts:
In a floor speech, Mrs. Boxer again rejected the Republican criticism, although her amendment suggested that there might have been some reason to question the possibility of future bailouts.
“When I heard my colleagues on the other side say Senator Dodd’s bill would ensure taxpayer bailouts, I knew it was false,” she said. “It is like saying this glass of water is a cup of coffee. No, this glass of water is a glass of water. It is not coffee.”
Still, Mrs. Boxer said, Why not clear things up? “I said to Chairman Dodd, I have an idea that we should put together a very simple bill, an amendment to the bill that basically says what we know is true, that all financial companies put into receivership under this title shall be liquidated. No company is going to be kept afloat. All funds expended will be repaid to the taxpayers by the financial sector through assessments or the sale of the assets of the company.”
In a provision titled, “Liquidation required,” Mrs. Boxer’s amendment states: “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. 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.”
Her amendment also stresses that taxpayers will not pay for shutting down failed companies. “Taxpayers shall bear no losses from the exercise of any authority under this title,” it states. “All funds expended in the liquidation of a financial company under this title shall be the responsibility of the financial sector, through assessments.”
The Weekly Standard's Stephen Hayes interprets this as proof the conservatives were right all along:
Why do that if the original bill already accomplished that? ... Even the New York Times, in its ever-understated way, acknowledged the obvious: "In a floor speech, Mrs. Boxer again rejected the Republican criticism, although her amendment suggested that there might have been some reason to question the possibility of future bailouts."
So the bill decreases the probability of a future bailout by clamping down on risky behavior. It does nothing whatsoever to create or provide for bailouts. But then conservatives claim the bill provides for bailouts. So you try to defang them by inserting a provision reiterating that nothing in the bill can be used for a bailout. Their response is to say: A-aha! If there was no bailout, then you do you need this amendment?