Republicans Are Losing Their Way On the Bank Bill

Republicans have backed their way into a corner in opposing the bank bill. The “just say no” to bailouts is totally delusional. If the big bank fail, you do have to bail them out or it really will be a total collapse. That’s why you have to regulate them, which is the lesson we should have learned when Bush bailed out the banks. Michael Barone, usually an astute commentator has missed the boat by a wide margin on this one. The two Republican commissioners on the SEC voted not to prosecute Goldman Sachs for what’s fairly clearly extreme criminal behavior. Goldman is being prosecuted because they marketed and sold a security that was constructed by someone who was shorting the security while clearly misleading the clients about what was going on. This is the equivalent of Ford selling you a new car with the full marketing of its safety features while (with Ford’s complete knowledge) the engineers go to Vegas and bet a billion  dollars (yes billion with a b) that all of the cars of that model will explode. The Goldman team should be arrested and prosecuted to the full extent of the law. Here’s a short, but high quality analysis of the situation:

It’s hard for me to understand why the Republicans think these positions make any sense. Here’s a very good article in today’s financial times on regulation by Martin Wolfe. It explains why this is such a serious issue. The Democrats have their share of class warfare items in the bill (most of the consumer protection items) but at least they aren’t sticking their heads in the sand.