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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As long as the Democrats continue to control Congress, we’ll have to endure an endless procession of initiatives for the federal government to take over industry after industry. Health insurance and college loans went under federal hegemony with passage of a single bill, known as “ObamaCare.”

Now, a new bill, referred to by the name of its chief sponsor, the ethically challenged Sen. Chris Dodd of Connecticut, aims to consolidate a federal takeover of the nation’s entire network of financial institutions.

As Peter Wallison of the American Enterprise Institute notes:

Does the bill, as [Republican Senate leader Mitch] McConnell said, “institutionalize too big to fail?” Of course. There can’t be any reasonable doubt about this. The bill authorizes the Fed to regulate all non-bank financial institutions that are “systemically important” or might cause instability in the U.S. financial system if they failed. . . .

The market will see immediately that the government has created Fannie Maes and Freddie Macs in every sector of the financial system where these large companies are designated for Fed regulation, including insurance companies, hedge funds, finance companies, bank holding companies, securities firms, and any other kind of financial institution the government wants to regulate. Since these firms will be too big to fail, they will be seen in the market—as Fannie and Freddie were seen—as ultimately backed by the government and thus safer firms to lend to than small firms that are not government backed. This will permanently distort the financial market, favoring large companies over small ones, and eventually force a consolidation of each market where these firms exist into a few large competitors operating under the benign supervision of the government.

In other words, this is another huge step toward fascistic corporatism, completing a de facto government takeover of today’s nominally “private” financial firms. These corporations would be reduced to the status of politically managed public utilities.

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A must read piece by Peter Wallison in today’s Wall Street Journal:

It’s hard to imagine a worse piece of financial regulatory legislation than the bill Barney Frank and the administration put before the House Financial Services Committee last month. But Sen. Chris Dodd’s effort, introduced last week, clears this hurdle

Much attention has focused on the fact that his “Restoring American Financial Stability Act” differs from the administration and Frank proposals by creating an entirely new agency to function as a “systemic regulator” of nonbank financial institutions, instead of the Federal Reserve. Far more important, however, is the regulatory and bailout powers it gives to the government. Here the Dodd bill follows the same flawed ideas advanced by the administration and Mr. Frank, but in some ways make things worse.

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