Wall Street Reform: A Big Flop for the Big Lie Strategy?
WASHINGTON - Over the
past two decades, Wall Street pushed hard to weaken government oversight and
loosen regulatory restrictions on the financial industry's behavior. Once Wall
Street was able to play by its own rules, old standards went out the window.
The resulting binge of greed, speculation, fraud, and reckless risk-taking
resulted in a financial meltdown that has cost millions of Americans their
jobs, homes, and retirement savings. The federal government was forced to step
in to prevent an even more chaotic and catastrophic financial collapse.
that Congress is taking serious steps to stop the abuses that have cost the
nation so dearly, big Wall Street banks and their political enablers have been
doing their best to block reform. They're using every trick in the book,
up a fake grassroots group that was designed to sound like a
progressive organization. Some unconvincingly
suggested that Republicans were opposing the Senate reform bill because it wasn't tough enough on Wall
Street. A centerpiece of these obstructionist strategies has been repeating
over and over again a brazen lie that the reform legislation before Congress
would put taxpayers on the hook for "endless" bailouts. The bill
would in fact do the opposite.
Audacious Lying as Propaganda Strategy
became a staple of right-wing political strategy long before Barack Obama
decided to run for President. Big lies by their nature are audacious, since
they are meant to convince people to accept a version of truth that is 180
degrees from reality. Think about the Swift Boat crowd's doggedly deceptive
effort to damage John Kerry by smearing his well-documented and highly
decorated military service. The Swift Boat episode epitomizes the Karl Rove
Machiavellian-Orwellian political approach to go after an enemy's strength, not
to the strategy is noise from the echo chamber of right-wing pundits online and
on Fox News -- and unwarranted credibility from conservative members of
Congress and other public officials. Since the 2008 presidential campaign,
right-wing political strategists have made audacious lies the go-to strategy
for opposing the Obama administration and its political goals. Let us count the
ways: Birtherism, death panels, Obama is a Marxist who wants to take over the
entire economy, Obama hates white people and white culture, Ivy Leaguer Sonia
Sotomayor is an undeserving affirmative action anti-white-male racist, the
federal hate crimes law is a "pedophile protection act" that will put
preachers in jail, the Obama administration hates religion. And so on.
makes it clear that telling big lies is not always successful in accomplishing
a particular goal, such as stopping health care reform legislation or keeping
Sotomayor off the Supreme Court. But the goal and impact is often broader:
taking the public option off the table, or contributing to the larger
right-wing Big Lie narrative that Barack Obama is a dangerous radical whose
political wings must be clipped in the 2010 elections to prevent the nation's
slide into tyranny.
brings us to the apparent collapse of the lie that Republican leaders led by
Senate Majority Leader Mitch McConnell have been deploying against efforts to
bring some much-needed transparency and accountability to the financial
industry: that Wall Street reform guaranteed "endless bailouts" for
Bailout Lie seems to be falling apart under the weight of its own transparent
falsity and by some GOP strategists' calculations that standing in the breach for
billionaire hedge fund CEOs may not be the most effective political positioning
headed into the fall elections. Recent news reports suggest that GOP leaders
are now angling for a face-saving compromise, a strategic flip-flop that has
given rise to what we can call Son of the Big Lie: which is to claim that their
Bailout Big Lie was right all along and we should be grateful that they stuck
to their guns. You can see why they think this new lie is worth a shot
politically, but it's equally transparent.
Lying to Protect Big Money from Reform and Regulation
congressional leaders were always in a bit of a difficult situation around the
effort to bring some more effective oversight and regulation to the industry
whose irresponsibility has gravely damaged the American economy and drained the
hand, the GOP is closely tied to the Wall Street interests who most strongly
oppose regulatory reform. On the other, right-wing tea party activists and
independent voters are angry about taxpayer bailouts and their belief that Wall
Street CEOs have been rewarded, rather than held accountable, for financial
wrongdoing that has devastated the nation's housing market and economy. So it's
not a great time to be exposed as carrying political water for billionaire
hedge fund executives - the people Mitch McConnell visited begging for
campaign contributions just before launching attacks on Wall Street reform.
January, Republican pollster and communications strategist Frank Luntz
distributed a strategy memo
instructing Republican officials how to obstruct Wall Street reform while
confusing the American public about who was looking out for their interests.
Among Luntz's key recommendations was to tie reforms to big bank bailouts.
There's the 180 degree spin from reality. One of the key goals of Wall Street
reform legislation being considered in both houses of Congress is preventing the need for such bailouts by
clamping down on the kind of overly risky behavior that led to the financial
system meltdown. The legislation has been designed to create mechanisms to shut
down failing institutions in an orderly way to prevent the need for expensive
improvised bailouts in the future.
So, to be
clear, the purpose of the Bailout Lie was to let Republicans get away with
stopping reforms that would crimp the style of Wall Street speculators while at
the same time convincing tea party activists and Main Street Americans that it
was somehow the Democrats doing Wall Street's bidding. That's a big bluff. But
Senator McConnell is nothing if not audacious in putting the Bailout Lie to
As MSNBC commentator Rachel Maddow noted in a recent show skewering
McConnell for doggedly promoting this false attack on the legislation,
"reality is not exactly how this stuff works."
Attacks on the House Reform Legislation
February 3, Factcheck.org, a project of the Annenberg
School at the University of Pennsylvania,
that a secretive group called the Committee for Truth in Politics, was running
ads in 35 markets attacking the Wall Street Reform and Consumer Protection Act
which had passed the House. Factcheck's post -- "The Big Bank Bailout
Bill?"- debunks the ads' claims that the reform bill amounts to a
"new $4 trillion bailout for banks. If they fail. Again." More
recently, USA Today reported
that the Orwellian-named interest group had spent $5 million on its anti-reform
ads while refusing to disclose any of its contributors.
Factcheck.org post notes that the House bill actually puts caps on lending
authority the Federal Reserve already has and would create new restrictions on
the use of that authority, and that a $150 billion pot of money to help deal
with future financial crises would be funded by fees from large financial
We take no position on whether the $4 trillion cap is
too big or too small, or whether the authority itself should or should not be
granted. But there's nothing in the bill that requires that banks get this loan
money at any point in time, a fact that may well be lost on viewers of the ad.
addition, Factcheck quotes a House Financial Services Committee staffer
refuting the claim that the $4 trillion is available "if [banks]
"That's 1,000 percent incorrect," he says,
pointing to another provision in the bill that gives regulators the authority
to dissolve "systemically important" firms that are failing.
"They will use a fund paid for by the industry to put it out of its
misery" and "stop any spread of this sort of financial contagion that
can take down the financial system or harm the economy."
be noted that even before Luntz blessed the strategy with his January memo,
some right-wing propagandists were already trashing the House legislation. Back
in December, Walking Big Lie Rep. Michele Bachmann of Minnesota called the House
bill "a complete government control of the financial services
industry" and said it would make bailouts permanent and givethe president
the authority to make future bailouts at his own discretion. According to
Bachmann's typically over the top refrain, "it isn't that socialism has
occurred in our lifetime, it's in the last
McConnell Leads Attack on Senate Legislation
weeks, Senate Majority Leader Mitch McConnell has endlessly parroted
Luntz's rhetorical deceptions such as his claims that the Wall Street reform
bill being considered by the Senate would result in "endless taxpayer
bailouts." McConnell, who built a now-collapsing partisan wall of
opposition to the reform bill, had also tried recycling another old GOP
strategy on the health care bill, which is to insist
that reform legislation had to be thrown out so senators could start all over
on a bipartisan bill.
has had plenty of help from conservative commentators and the right-wing echo
chamber. Media Matters has documented the
lie's appearance in right-wing media, including Fox News and the opinion pages
of the Wall Street Journal. The "bailout" language spread beyond that
as well. During a CNN report on reform, the crawl on the bottom of the screen
read, "Financial Fix or Wall St. Bailout?"
The Truth: Shutdowns Not Bailouts
Bailout Lie is as bold as it is false. As President Obama himself said in taking
on McConnell's charges, the Senate Majority Leader was making a
"cynical and deceptive assertion that reform would somehow enable future
bailouts -- when he knows that it would do just the opposite."
the provision of legislation under consideration in the Senate that McConnell and
others decried as a "bailout fund" would actually create an orderly,
bank-funded process for authorities to shut down - not bail out -
giant financial firms that get into trouble. Sen. Mark Warner (D-VA) made clear
that this wasn't the preferred option of Wall Street executives when he told
the Washington Post, "No rational management team would ever choose
resolution. It means shareholders wiped out. Management wiped out. Your firm is
going away." As the Washington Post editorialized
last month, the Senate bill "provides a way to rein in the risks"
taken by large financial institutions, and "and taxpayers won't be on the
hook if they nevertheless collapse."
is true for the House bill. Rep. Barney Frank said the legislation will provide
"a mechanism for putting non-bank financial institutions out of
journalist Edmund Andrews has written:
"The recent bailouts kept zombie banks and AIG
alive, because both the Bush administration and the Federal Reserve correctly
feared that their collapse would set off a chain-reaction of failure. The
bailouts were necessary because the government didn't have the authority to
shut the companies down in an orderly way....The new resolution authority
would give the government new powers to take over and shut down failing giants.
That is quite different from bailing out a bank and keeping it alive.
Wall Street Reform-in-Waiting
Bailout Lie failing, it seems more likely that reform legislation will make it
through the Senate and ultimately to the White House for the president's signature,
and the lobbying by the financial industry and others to influence the final
makeup of the bill will undoubtedly be intense. Until the final bill is in
place it's impossible to say who all the winners and losers will be - but
it's clear that the Luntz-McConnell Bailout Lie is one of the losers.