Liberals in congress are trying to sell the Dodd bill as a bill that would stop the bailouts by regulating Wall Street, but, it actually creates permanent bailouts that will fund corrupt Wall Street executives who make poor decisions. Did I mention that these bailouts will come at the taxpayer’s expense? The Heritage Foundation put together a great video explaining why this bill is a Wall Street Bailout Bill.

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The more details that emerge about the Obama-Dodd financial “reform” bill, the worse it smells. The bill is most certainly an attempt to give the government vastly more power and control over the economy. And despite the vocal, condescending, even mocking protestations from Democrats and their allies, this bill does in fact contain unlimited bailout authority for the Fed. It’s right there in the bill for the world to see.

But it is increasingly evident that there may be something more sinister going on behind the scenes that is driving this debate.  The President trotted up to New York to give a big televised speech and scolded Wall Street for “resisting reform” saying that if we are to prevent another crisis, we must pass his bill.

The whole charade amounted to little more than political theater.  Big Wall Street banks actually WANT this bill.  Executives for Citigroup and Goldman Sachs (two firms that both received bailout funds) have both made statements in favor of Obama’s financial reform bill.

So, one must ask, if this is so draconian on Wall Street, why do they want it so badly?  The answer to this question is in the details of the bill: Not only does this bill not rein in big Wall Street banks, its actually a very big gift to Big Banks and other special interests—gifts that will cost Main Street, the taxpayers and consumers.

The large financial institutions at the root of the financial crisis wouldn’t even be regulated by the CFPA. Their oversight would remain at the porn-surfing Securities and Exchange Commission. But of course the bill is full of burdensome regulations for smaller institutions with which they will struggle to comply and also remain profitable.  The larger banks that are covered will not only have the resources to adapt but will also likely grow even larger by swallowing up smaller institutions that can’t make it.

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Yesterday, Republicans held firm against bailouts to big banks and Wall Street.  They held firm against creation of a super regulatory bureaucracy.  They held firm against a massive government intervention in our economy.  All in all it was a good day.

But a word to the wise:  DO NOT SNATCH DEFEAT FROM THE JAWS OF VICTORY.

Republican leaders have been making noises about a compromise measure for a week.  Now is not the time to get weak.

The Democrats continue to deny the bill is a bailout.  But they are slowing losing that battle.

NPR said:

“A vote for reform is a vote to put a stop to taxpayer-funded bailouts,” Obama said in his speech in New York on Thursday.

I cannot find any experts — of any party — who are willing to agree with Obama on this one.

“We’re not seeing a very forceful step on the too-big-to-fail problem,” said Carmen Reinhart, an economist at the University of Maryland. “If there’s any doubt that the crisis may be systemic, we will bail out again.”

So, if a major bank says, “Hey, save us or the economy will go under,” the government’s going to save the bank. Full stop.

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Sen. Chris Dodd’s financial regulatory reform bill, on which the Senate is slated to take a cloture vote this afternoon, has been the subject of much criticism of late, primarily for what opponents say amounts to a de facto institutionalization of “too big to fail” with regard to the biggest power players in the financial sector.

However, Capitol Confidential has learned that there is another, equally troubling aspect of the bill that observers say is going unnoticed in the debate surrounding Dodd’s proposals: Its hammering of community banks.  Relatively small institutions compared to the names often cited in the news, community banks typically operate in small towns, urban neighborhoods or the suburbs.  Their remit usually involves funding small businesses that require credit in order to operate payrolls and to expand, and lending to families financing home purchases or college.   Many of those familiar with the banking industry, overall, say that community banks bore little to no responsibility, on balance, for the financial meltdown that occurred in 2008.  Nonetheless, an analysis of the Dodd bill indicates that if it passes, community banks will be subject to a whopping 27 new regulations that one individual who has worked with banks professionally and is closely tracking the legislation says “could threaten to put many community bankers out of business, thus reducing competition in the banking sector overall, and diminishing consumer choices.”

That individual further asserts that while the bigger, Wall Street banks will likely be able to adapt to the bill (though their efficiency and ability to compete internationally could take a knock), the community banks will not—potentially making the system more risk-prone, also.

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As Democrats continue to up the volume on their deceptive campaign to pass a new government takeover and bailout bill for bit Wall Street Banks, apparently there is some nervousness about the pressure Democrats are directing at the two Republican Senators from Maine. The mystery group Committee for Truth in Politics is back up on the air in the Pine Tree State with an ad opposing the Big Bank Bailout.

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Conservative talk radio in Memphis is calling for the firing of the staff member of Sen. Bob Corker who demeaned and belittled Tea Party activists in the Volunteer State calling them “sad” and “creepy” when they visited the office protesting Corker’s support for establishing a permanent bailout fund for companies “too big to fail.”

Corker is leading the charge for a “bipartisan” deal on so-called financial reform legislation that will create bailouts as far as the eyes can see, create a new regulators for small businesses (that had nothing to do with creating the crisis) and empowering big labor with shareholder proxy provisions aimed at undermining private company policy decisions. The House passed version of the bill authorizes the Federal Reserve to spend up to $4 trillion for bailouts. The Senate version is a blank check.

Attitudes are set at the top of the organization.

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Today I am releasing the following web video highlighting President Obama’s financial bailout bill that will impose burdensome regulations and new fees on local banks in my district back in Ohio and other local communities around the country. In addition, Obama’s plan rewards top Democratic contributors and promises permanent bailouts to Wall Street companies deemed ‘too big to fail.’ The video and full remarks are outlined below:

The American people have made it clear that they’ve had enough of the bailouts and all the open-ended expansion of government in Washington.

But instead of listening, President Obama and the majority party in Congress continues to scheme up new costly policies that will make bailouts permanent, kill jobs and impose new burdens on taxpayers.

This week, they’ll continue with their push to pass a job-killing permanent bailout bill for Wall Street.

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The “Restoring American Financial Stability Act of 2010″, authored by Senator Chris Dodd (D-CT), will be considered by the Senate in the very near future and it will make federal bailouts of private enterprise permanent.  The House has already passed Congressman Barney Frank’s (D-MA) bailout bill by a 223-202 vote in December.  Both bills, supported by President Barack Obama, expand bailout authority for the federal government.   These bills provide a back door bailout of Wall Street.

The debate between Republicans and Democrats has centered on a $50 billion bailout fund in the Senate bill.  The provision would have the effect of bailing out a failing business’s creditors during the liquidation process.  The President has called for the pre-funded $50 billion bailout fund contained in the bill to be removed.

The irony is that the Obama Administration supports a different provision in the bill that provides an even bigger bailout of Wall Street.  The other provision, which appears in both the House and Senate bills, provides the Federal Reserve unlimited amounts of money in the form of “loans” to failing businesses.  If you like the AIG bailout, get ready for that style of bailout for companies deemed to be friends of the Fed and “too big to fail.”

The House bill contains an authorization for the Federal Reserve for $4 trillion in “secured loans” to bailout individuals, partnerships or corporations in financial distress.   Page 506 of the House passed bill, titled the Wall Street Reform and Consumer Protection Act states in part:

The amounts made available under this subsection shall not exceed $4,000,000,000,000.

The Senate bill has the same loan authority with no cap on the amount of funds available to failing businesses.

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It’s not often the two Republican Senators from Maine safeguard the country from excessive government with more vigilance than a Republican Senator from Tennessee.  But on the issue of Financial Reform, Sen. Collins and Snowe have become champions for the taxpayers — holding the line against more bailouts and bureaucracy — while Sen. Bob Corker continues to push the country toward permanent bailouts and a Washington regulatory scheme “one like we have not seen before.”

Big Government readers are well aware of Corker’s repeated attempts to cut a deal with “Countrywide” Chris Dodd.  Despite signing a letter pledging to oppose the legislation, Corker is now taking to the airwaves denying the legislation contains a permanent bank bailout provision.

Neat trick Senator. Swear to your constituents that you oppose further bailouts and then push a bailout bill by simply saying it contains no bailouts.

Corker has become to Financial Reform what Sen. Lindsey Graham is to climate change legislation — a sucker.  And his words are being used by left-wing activists to deny there is a bailout in the legislation.

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From the great Peter Wallison in today’s Wall Street Journal:

The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government’s cost to bail out Fannie and Freddie will eventually reach $381 billion. That estimate may be too optimistic.

Last Christmas Eve, Treasury removed the $400 billion cap on what the government might be required to invest in these two GSEs in the future, and this may tell the real story about the cost to taxpayers. In typical Washington fashion, everyone has amnesia about how this disaster occurred.

The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.

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Sen. Susan Collins (R-ME) understands that the Dodd Financial Reform bill they are trying to ram through the Senate is a bailout.  She has publically opposed the legislation.  But that hasn’t stopped the Administration from pressuring her to change her mind.

The Wall Street Journal reports that Treasury Secretary Tim Geithner will be meeting with Sen. Collins to try to get her to see a different version of reality.

But, the American Enterprise Institute’s Peter Wallison says that not only is the bill a bailout but it would benefit Goldman Sachs”  “That act—paying off the creditors when the government takes over a failing firm—is a bailout. It doesn’t matter that the management lose their jobs, or that the shareholders get nothing. When the creditors are aware that they will get a better deal with the failure of a large company than they will get with a small one that goes the ordinary route to bankruptcy, that is a bailout.”

To top it off, the fees for the Dodd bill’s resolution fund that would pay off a failing firm’s creditors would come not just from banks but from a broad array of Main Street businesses. Stable life, auto and home insurance companies would have to pay into this fund to subsidize the failure of the next high-roller, and the fees they pay would likely be passed on in the premiums their policy holders pay. And the bill’s definition of  “nonbank financial company” is so broad that it could cover manufacturers only tangentially involved in extending credit, such as those that lease equipment to their customers. This would raise prices and cost Main Street jobs.

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Liberal pundit Michael Kinsley once defined a political gaffe as an instance of a politician accidentally telling the truth. House Financial Services Committee Chairman Barney Frank, D-Mass., recently made a gaffe that fits Kinsley’s definition to a tee.

In a debate with Ralph Nader on MSNBC’s “The Ed Show,” in which Nader was accusing Frank of being too timid on the financial regulation bill then moving through the House, Frank responded, “We are trying in every front to increase the role of government in the regulatory area.”  Conservative blogs took note of Frank’s use of the word “every front”, as did Rep. Paul Ryan (R-Wis.), and earned a brusque “tsk- tsk” from The New Republic’s Jonathan Chait.

This is an example of “the conservative misinformation feedback loop in action,” Chait exclaimed. Frank was only talking about banking, Chait claimed, and “not confessing to a plan to expand government in every area.”

Actually, in prefacing his comments, Frank moved the topic from Nader’s point about derivatives to the broader issue of how “the right wing took control of government and ruined it” and how it is supposedly benefitting from its “own incompetence.”  But if one still doesn’t want to take this as Frank’s confession of wanting to increase government intervention “in every front,” one need look no further than the bill by Frank that passed the House in December and Chris Dodd’s Senate “financial reform” bill that Democrats are trying to ram through the Senate.

In the debate, Democrats never tire of accusing Republicans of siding with “Wall Street banks.”  But last week Republicans made headway when Senate Minority Leader Mitch McConnell pointed out that the bill $50 billion resolution fund would institutionalize bailouts for big banks, whether these banks failed themselves or acted as creditors to too-big-to-fail institutions.  Even an editorial in the Washington Post stated that “Mr. McConnell is partly right” and that “creditors might fund systemically important firms on artificially advantageous terms, thus enabling them to grow bigger and riskier.”

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The Obama Administration is concerned their takeover of the financial industry is at risk and are offering Republicans a fig leaf to buckle.

First they deny there was a bailout in the legislation. Now they are proposing the removal of a $50 billion fund that oversees future bailouts.

Don’t be fooled — the $50 billion is just a downpayment to administer future bailouts. The funding for the permanent bailouts will come from the Federal Reserve under the Blank Check Bailout bill.

The House bill authorizes the Fed to spent $4 trillion to bailout and “wind down” companies. The Senate bill doesn’t have a cap.

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Democrats’ collective fixation on Frank Luntz’s memo on Financial Reform misses the point entirely but it is very telling.

The now famous Luntz memo makes strategic recommendations based on an aggregation of voters’ responses to being informed about various portions of the Dodd Blank Check Bailout bill in factual, common sense, simple language.  The public spoke and Luntz recorded it. He didn’t make up the fact that there is a $4 trillion dollar bailout in the bill. Its right there in black and white.

But what has Democrats completely possessed is that what the public said is inconvenient to their Orwellian plan to dupe America into believing that up is down, black is white and that the Dodd bill will end “too big to fail”, contains no new bailouts and will possibly save endangered animals.

Their plan is a two step process: First, use oblique language about “protecting consumers” and “ending too big to fail” to convince the public that the Dodd bill is somehow “financial reform”. Then, bully Senate Republicans into voting for Dodd’s government takeover bill by portraying them as against said “financial reform.”

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Despite efforts by some weak sisters like Sen. “Bailout” Bob Corker (R-TN) to cut a deal with “Countrywide” Chris Dodd (D-CT) on legislation to create a Blank Check Bailout Bill and lots of loud speculation from Senate Democrats about peeling off a Republican, Senate Republicans are currently holding firm against intimidation tactics to ram the bill through the Senate a la Health Care Reform.

Sources on Capitol Hill report that Sen. Shelby recently briefed Senate Republicans about the bill and got unanimous support for his efforts to block the Democrats latest government takeover scheme.  Unanimous support means that even the Senators from Maine — Susan Collins and Olympia Snowe are holding the line against future bailouts despite ongoing White House efforts to jam the bill. According to our sources, Collins even went so far as to make an explicit commitment to Shelby to oppose the bill saying she has many problems with it.

And with good reason too. As readers recall, the so-called “Financial Reform” legislation contains a number of key provisions – none of them good–that creates more bureaucracies, more fees and taxes, more Washington red tape and makes bailouts the permanent policy of the US Government.  But while offering permanent bailouts and a government takeover of the rest of our economy the legislation of course does nothing to address the root causes of the crisis including Fannie Mae, Freddie Mac and the consumer lending laws that pushed mortgages to people who could never afford to pay them back.

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From Politico:

John Paulson, one of the world’s richest hedge fund managers, has not been shy about spreading his wealth to Senate campaign coffers — or to the chairman of the committee that could directly affect his bottom line.

Paulson held a ritzy $1,000-per-head fundraiser for Senate Banking Committee Chairman Chris Dodd last year — and then maxed out his donation with $4,800 more for the Connecticut Democrat’s now-aborted reelection run.

Paulson is hardly alone.

According to a review of Federal Election Commission records, the nation’s 10 richest hedge fund managers have dumped nearly $1 million into campaign accounts over the past several years — with much of it going to senators who’ve given them a friendly reception on Capitol Hill.

And despite all the tough talk about a crackdown on Wall Street, consumer advocates and critics from other financial sectors say hedge funds would get off pretty easily under the regulatory reform bill Dodd’s committee approved last month — a charge Dodd’s aides reject.

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It’s not often that we can give credit to Barney Frank but when it comes to the issue of Financial Reform at least we can say is he was honest enough to put a price tag on the proposed permanent bailout fund.  Can’t say the same for Sen. Chris Dodd.

The Frank bill’s price tag for future bailouts was clear — $4 trillion.

Sen. Dodd’s bill proposes the same bailout authority but makes matters even worse — he leaves the check blank.  Taxpayers will be on the hook for any amount.

Dodd’s bill gives the Fed “emergency lending authority” to “any “ entity or market utility, program or facility that the Financial Stability Oversight Council determines is or is likely to become “systemically important.”

But don’t worry. They have to report back to Congress why they used this authority within seven days after they use it. But– they only have to disclose who they helped “within one year” and only if they deem that it won’t hurt the “effectiveness of the program”

Still thinking maybe this isn’t a bailout?  Well, on page 1306, one of the requirements is that the Fed has to report to Congress  “ the expected or final cost to the taxpayers of such assistance.”

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Surprise, surprise. Sen. Chris Dodd’s financial-regulation proposal raises the possibility of substantial progress on the road to ending “too big to fail” (TBTF) and bailout nation for banks and other financial institutions.

How the Dodd bill will play out in the final details remains to be seen. But when you read the Dodd fact sheet, there are a few key items to like.

First, under the Dodd scheme, large complex companies will have to submit plans for rapid and orderly shutdowns should they go under. These are called “funeral plans.” Then, in terms of these orderly shutdowns, the bill would create an “orderly liquidation mechanism for the FDIC to unwind failing systemically significant financial companies. Shareholders and unsecured creditors will bear losses and management will be removed.” Good.

Then comes the “liquidation procedure.” This spells out that the Treasury, FDIC, and Federal Reserve must all agree to put companies into the orderly liquidation process. “A panel of three bankruptcy judges must convene and agree — within 24 hours — that a company is insolvent,” the bill goes on to say. It also states that the largest financial firms will be assessed $50 billion for an upfront fund that will be used if needed for any liquidation. This is a kind of debtor-in-possession safety net for the bankruptcy-liquidation process. Also good.

Finally, under the heading of bankruptcy, the bill stipulates that most large financial companies are expected to be resolved through the normal bankruptcy process. This is the key. However, it is not an airtight case for bankruptcy. It is possible that a government-resolution process could keep big banks alive or in conservatorship, such as with Fannie and Freddie. That would be wrong. Very wrong. In fact, one of the flaws in the Dodd bill is that there is no mention of Fannie and Freddie.

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With the focus this week on health care’s “home stretch” and concerns about government limiting the ability of ordinary Americans to make choices about medical treatment, another threat to freedom is accelerating that could harm Americans’ abilities to start a business, invest for retirement, and get affordable home and auto insurance policies. On Monday, after abruptly shutting down earnest negotiations between Senate Republicans, Senate Banking Committee Chairman Chris Dodd wannounced a partisan so-called financial regulatory reform bill that he will try to ram through his committee within a week.

And this 1336-page bill will do nothing to put restrictions on two entities that were proximate causes of the housing bubble, the government-sponsored Fannie Mae and Freddie Mac, and instead hit Main Street businesses and entrepreneurial firms that had nothing to do with the crisis. The bill’s specific provisions would  penalize the corporate structure of public companies from Google to Warren Buffett’s Berkshire Hathaway, tax prudent banks stable home and auto insurers and their policy holders to pay for the bailout of the next Lehman or AIG, depress revenues from incorporation fees  in Sen. Harry Reid’s Nevada and Vice President Biden’s Delaware by federalizing corporate governance laws, and put thousands of retailers who issue gift cards or even offer layaway plans under a new Federal Reserve bureaucracy to regulate credit.

Here are the highlights of some of most destructive provisions for the freedom of entrepreneurs, investors and consumers.

1. The shareholder rights jujitsu with “proxy access” and other corporate governance mandates.

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It’s time for your weekly dose of Coffee and Markets, featuring The New Ledger’s Francis Cianfrocca, a podcast brought to you by the fine folks at Andrew Breitbart’s BigGovernment.com and LibertyPundits.com, your home for conservative podcasts. In this week’s edition, we’ll talk about the fallout from a failed attempt by Senators Dodd and Corker to make new financial regulations bipartisan, the latest activity on the bond markets, and what’s next for Obamacare.

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HCN: Democrats Consider Drastic Moves to Pass Health Care Bill
T-Shirt: Lobby the Rahm Emanuel Way