There they go again . . .

Mitch McConnell (R-KY) is spouting the Republican talking points, trying to discredit the financial regulatory bill. A week after meeting with officials from 25 big Wall Street banks, he took to the Senate floor to claim that the reform bill actually guarantees "endless taxpayer bailouts of Wall Street banks."

McConnell went further:

"The Dodd bill' gives the government a new backdoor mechnism for propping up failing or failed institutions . . . . We won't solve this problem until the bigget banks are allowed to fail."

This is total bullshit. It is also exactly what the Republican political strategist, Frank Luntz, told them to say in his list of talking points designed to defeat regulatory reform.

Here's what the bill actually does.

It creates a Financial Stability Oversight Board to monitor large financial institutions. There will be a fund, paid for by the banks themselves, with no other purpose than shutting down failing firms that would pose some risk to the system. This will insure that it is done smoothly, in a way that protects the overall economy. It is not a bailout. The failing institutions will not be bailed out, Senator McConnell; they will be shut down in a way that does not hurt the economy. Your plan -- just let them fail all by themselves -- would hurt the economy. So it is more likely than the reform plan to result in a necessary bailout like the one instigated in 2008 by George Bush.

In Barney Franks' colorful language:

" . . . if they run into trouble the Board becomes a death panel. If a Wall Street bank or investment bank begins to fail, threatening the safety of the financial system, it will be put to death. End of story. Shareholders are wiped out, unsecured creditors are out of luck, management and every employee that is not required to shut down the company is fired. And even secured creditors may be required to take haircuts. The industry pays into a fund to put the institution to death, and this fund is only used to protect the system and our economy when the bank fails."

This is what Mitch McConnell claims is a permanent taxpayer bailout?

At least the Democrats have fought back aggressively. Senators Dodd, Whitehouse, Warner, Jack Reed, and others have all denounced McConnell's distortions. Even some Republicans have distanced themselves from their own minority leader's silliness (as MSNBC's John Harwood called it.)

Ralph