Now that the world is belatedly waking up to the fact that President Obama lied his face off about the fiscal impacts of health care reform, maybe it's an appropriate time to point out that he's lying his face off about financial reform as well:
The goal is to make certain that taxpayers are never again on the hook because a firm is deemed "too big to fail."
Now, there's a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. And that's a legitimate debate, and I encourage that debate. But what's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true.
Not legitimate, not factually accurate, not true. Those are pretty strong words to describe National Public Radio, Mr. President!
Take, for example, "too big to fail"—the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.
"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on Thursday.
I cannot find any experts—of any party—who are willing to agree with Obama on this one.
"We're not seeing a very forceful step on the too-big-to-fail-problem," said Carmen Reinhart, an economist at the University of Maryland. "If there's any doubt that the crisis may be systemic, we will bail out again."
So, if a major bank says, "Hey, save us or the economy will go under," the government's going to save the bank. Full stop.
We did find one expert, Doug Elliott of the Brookings Institution, who is actually a huge fan of the regulatory reform bills. He says they bring a bunch of changes that make our economy safer.
But they don't end too big to fail, he said. The only way to do that is to break them up so that "they're so small that we don't care" if they fail.
Note: This report is from NPR's Adam Davidson, who has done some of the most thorough reporting out there on the financial crisis.
Link via Tim Carney's great Twitter feed.