In a speech on the Senate floor, McConnell left little room for common ground. He blasted the bill’s various provisions, as proposed by Senate Banking Chairman Christopher Dodd. It passed the Senate Banking Committee on a partisan vote.
Stricter financial oversight is the next priority for President Obama. U.S. Treasury Secretary Timothy Geithner today wrote an opinion piece on the need for the reform bill’s passage.
For Republicans, the Federal Reserve retaining its emergency bailout authority is a significant point of contention, as is a proposed $50 billion fund to dismantle firms seen as posing a risk to the U.S. economy.
“A new $50 billion fund would also be set up as a backstop for financial emergencies,” McConnell said. “But no one honestly thinks $50 billion would be enough to cover the kind of crises we’re talking about.”
Insurance giant AIG alone received “more than three times that from the taxpayers,” he said.
“Moreover, the mere existence of this fund will ensure that it gets used,” the Republican leader said. “And once it’s used up, taxpayers will be asked to cover the balance. This is precisely the wrong approach.”
McConnell also blasted the proposed role of the Federal Reserve in overseeing the largest financial institutions. Both Republicans and Democrats have been critical of the Fed’s role in bailing out companies “too big to fail” during the peak of the crisis almost two years ago.
“It also directs the Fed to oversee 35 to 50 of the biggest firms, replicating on an even larger scale the same distortions that plagued the housing market and helped trigger a massive bubble we’ll be suffering from for years,” McConnell said. “If you thought Fannie and Freddie were dangerous, how about 35 to 50 of them?”
Mortgage financing giants Fannie Mae and Freddie Mac have also taken bailouts totaling $127 billion. Both companies have been under government control since late 2008.
“Everybody agrees on the need to protect taxpayers from being on the hook for future Wall Street bailouts,” McConnell said. “This bill would all but guarantee that the pattern continues. “