Senator McConnell – The Baseline Scenario

By Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

Senator Mitch McConnell continues to insist that the Dodd bill creates permanent bailouts – and that it would be definitely better to do nothing. Apparently, he has indicated a willingness to make a Senate floor statement to that effect every day.

Senator McConnell is completely wrong on this issue – and, if he gets any traction, we will feel the need to point this out every day. His remarks today and yesterday go far beyond any reasonable level of partisanship. This is about playing games with the financial stability of this country and the world; it should stop.

Don’t take my word for it – Senator Ted Kaufman is a strident critic of our current financial system and a tough voice for greatly strengthening the Dodd bill. But today he was as clear and as forceful as you can be on the floor of the Senate: Senator McConnell’s proposed approach is “dangerous and irresponsible.” Continue reading “Senator McConnell Is Wrong, Senator Kaufman Is Right. Any Questions?” →

By Simon Johnson

At one level, it is good to see the Republican Senate leadership finally express clear positions on the financial industry and what we need in order to make it safer. At another level, what they are proposing is downright scary.

In a Senate floor speech yesterday, Senator Mitch McConnell (Senate Republican leader) said,

”The way to solve this problem is to let the people who make the mistakes pay for them. We won’t solve this problem until the biggest banks are allowed to fail.”

Do not be misled by this statement. Senator McConnell’s preferred approach is not to break up big banks; it’s to change nothing now and simply promise to let them fail in the future.

This proposal is dangerous, irresponsible, and makes no sense. The bankruptcy process simply cannot handle the failure of large complex global financial institutions – without causing the kind of worldwide panic that followed the collapse of Lehman and the rescue/resolution of AIG. This is exactly the lesson of September 2008. Continue reading “Senator McConnell Is Completely Wrong On Financial Reform” →