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Sen. Mark Warner: Mitch McConnell 'either doesn't understand or chooses not to understand'

warner on mcconnell.JPG

When Sen. Mitch McConnell said that the Senate financial-regulation bill meant "endless taxpayer-funded bailouts for big Wall Street banks," he was, knowingly or not, taking aim at a policy that had been jointly developed by Sens. Mark Warner (D-Va.) (pictured above) and Bob Corker (R-Tenn.). The two lawmakers began collaborating last spring, when they started holding joint briefings on the financial crisis. Eventually, Sen. Chris Dodd tasked them with handling the problem of what happens when too-big-to-fail firms, well, fail. He tasked them, in other words, with handling the problem of endless bailouts.

After months of meetings, the two finalized an agreement in February. That's the "resolution authority" part of the bill, which begins in section 201. And in an interview in his office this morning, Warner was not too happy with McConnell's characterization of their work. "It appears that the Republican leader either doesn't understand or chooses not to understand the basic underlying premise of what this bill puts in place."

"Resolution," Warner continued, "will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would've been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone."

Another element of the Republican critique concerns the $50 billion "orderly liquidation fund" that the FDIC will raise by taxing the banks. The idea of this fund is to create holdover money so the bank doesn't collapse while regulators are trying to unwind it. Sen. Richard Shelby, the ranking Republican on the Banking Committee, called it a "slush fund" and said that “the mere existence of this fund will make it all too easy to choose a bailout over bankruptcy.”

"Again," says Warner, "it's either that they don't understand or they choose not to understand. There's nobody in the financial sector who believes this. They'd laugh at the proposition that $50 billion is enough to get you through the resolution process if a couple of firms go down. What we've heard time and again is that the challenge in a crisis is to buy enough time to keep the lights on for a few days till you get the FDIC in here. You could make it smaller. Corker and I spoke about $25 billion. But this is funded by the industry."

"And here's the hypocrisy of the Republican leader's comments," continues Warner. "I can guarantee you that if there had not been some pre-funding, the critique would've been: 'Look at these guys! They've left the taxpayers exposed! What's going to keep the lights on for these few days? It's going to be Treasury funds or Federal Reserve funds. The taxpayer will be exposed!' ”

"If you haven't spent time with these issues," Warner sighed, "it's easy to pop off with sound-bite solutions that don't work."

Photo credit: By Adrin Snider/Daily Press.

By Ezra Klein  |  April 14, 2010; 11:18 AM ET
Categories:  Financial Regulation  
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Comments

McConnell and Shelby could care less about the actual policy; they care only about scoring political points.

Warner is absolutely right when he says, "I can guarantee you that if there had not been some pre-funding, the critique would've been: 'Look at these guys! They've left the taxpayers exposed! What's going to keep the lights on for these few days? It's going to be Treasury funds or Federal Reserve funds. The taxpayer will be exposed!' ”

The GOP is, for the most part, the party of Mayberry Machiavelli’s.

Posted by: nisleib | April 14, 2010 11:34 AM | Report abuse

There is a third alternative, of course. They understand and they are deliberately lying. My money is on door number 3.

Moreover, they really don't care. Don't care about the policy, don't care about the truth, don't care what you or Warner think. Thery only care about retaining power and campaign contributions from the banks to make that happen. Y'all really need to stop being surprised.

Posted by: Mimikatz | April 14, 2010 11:38 AM | Report abuse

"No rational management team would ever choose resolution."

Ezra, the same thing could have been said about the consequences of the current economic meltdown. Unfortunately, a 'management team' is simply made up of self-interested individuals and is not an cohesive independent organism with a self-preservation drive. The latest crisis taught us that as long as the individuals on that management team think they can personaly benefit, then they're willing to run the company into the ground. This destructive self-interest doesn't happen in all organizations, but you only need a few to bring the larger economic structure to its knees.

The thing we don't have and I haven't heard of in the finance reform is the ability of a company to hold individual officers personaly accountable... not just their job, but to recoup compensation. Only then will you have a realistic curb on the individual self-interest that will cause the next crash.

Posted by: Jaycal | April 14, 2010 11:39 AM | Report abuse

Wow, Warner sounds pretty agitated. I wish more Democrats would point out the frequent incoherence of Republican arguments--almost all of which are just new guises for their fundamental refusal to accept anyone else's right to govern.

Posted by: KBfromNC | April 14, 2010 11:41 AM | Report abuse

my vote is a combination of the doesn't understand and doesn't want to understand but it starts with him not generally being that bright.

Also do they call it a "slush fund" when insurers have reserve requirements that have been the case for a long time?

Again what will happen (IMO) is that Dems will want the pie in the sky, settle for what Republicans can deal with, Republicans will decry it and Dems will pay in the polls in November because people won't understand it. Same as healthcare. The Republican talking points are always better than the Dems.

Posted by: visionbrkr | April 14, 2010 11:58 AM | Report abuse

Being a Republican by inclination, whenever I read posts like this part of me tries to think of a way to argue that the Republican in question is not actually useless scum. With McConnell I can never think of a way. He's not quite as repulsive as Newt is the best I can come up with.

Posted by: ostap666 | April 14, 2010 12:04 PM | Report abuse

"it's easy to pop off with sound-bite solutions that don't work."

That's a snappy little phrase.

Paging Michael Steele! I think we have a new slogan for the RNC!

Posted by: eelvisberg | April 14, 2010 12:16 PM | Report abuse

"'If you haven't spent time with these issues,' Warner sighed, 'it's easy to pop off with sound-bite solutions that don't work.'"

GOPers spent plenty of time getting familiar with health care, but that didn't stop them from popping off with the "death panel" trope over and over.

It's called lying. And while the GOP doesn't have a corner on the fabrication market, they are the majority shareholder by far.

Posted by: RalfW | April 14, 2010 12:17 PM | Report abuse

"If you haven't spent time with these issues," Warner sighed, "it's easy to pop off with sound-bite solutions that don't work."

--- Mr. Warner, I'd like to introduce you to the Republican Party. The party of soundbites over substance and politics over policy.

Posted by: morecowbell | April 14, 2010 12:18 PM | Report abuse

Jaycal- Warner is directly addressing your point. His proposal wipes out shareholders AND management, so it takes some steps to address the agency problem.

On the whole though it's good to see Warner going on the attack.

Posted by: Quant | April 14, 2010 12:18 PM | Report abuse

I had same reaction as like 'jaycal' at first. But after reading when Warner says the firm stops to exist, we are talking Lehman Brothers here and not Citi who survived. So I do think things are not as bad as 'jaycal' suspects. But though he has a point that there are no new provisions to 'book' these bankers for criminal offense. My question - do we need new provisions for that or exist ones are there it is just that no one goes there?

Beyond these details, it is high time Warner starts earning his 'billing' of 'blue eyed Dem candidate' in post-Obama Democratic Party. He needs to do some pulling here for the Party.

As Fiscal discipline starts becoming more important (and potentially run on Treasury bond by bond vigilantes in near future - Pimco Bill Gross is dumping Treasury, Greece problem is not solved fully, Chinese may not take it lightly for the devaluation pressure, etc. ...); Warner has job to do and start taking the political center. He is also from Virgina, the bell weather Purple state, so better that he starts flexing his muscle for the Party. This is because, a day is going to come when this Obama is nothing more than mortally wounded warrior the way these Republicans are relentlessly attacking with all sorts of misinformation.

Posted by: umesh409 | April 14, 2010 12:27 PM | Report abuse

"Choosing not to understand" is equivalent to saying "He is a liar".

Posted by: Lomillialor | April 14, 2010 12:41 PM | Report abuse

This is the old Carville theory of "don't let any attack go unanswered". We see what happend in healthcare when the Democrats allowed the death panel rumors to gain steam, so Warner is trying to head off all this "permanent bailout" talk before it gathers any momentum. Smart.

Posted by: Quant | April 14, 2010 12:58 PM | Report abuse

Nicely written article. And excellent quotes from Warner. I'm impressed.

Posted by: slag | April 14, 2010 1:06 PM | Report abuse

The idea started circulating widely a few weeks ago that financial reform could probably get through because Republicans wouldn't want to be seen being on the side of banks in an election year, and so would be backed into a corner. The unfortunate flaw in this reasoning was to forget that they would just lie about it.

Posted by: jimeh | April 14, 2010 1:06 PM | Report abuse

Wow. Just wow.

Warner's always been too much the bloodless technocrat for me to feel much love for the guy. But apparently even a technocrat can get pissed if you tell him "you have your opinion, and I have mine" when he's just told you what the *facts* are.

I'm sure this wasn't what Warner was expecting out of his future colleagues when he ran for Senate two years ago. Now he's run into it head-on, and he's righteously pissed.

This is progress. It's important that our guys understand that the other side has no intention of playing fair. Until they do, we're in a never-ending loop of Lucy and the football.

Posted by: rt42 | April 14, 2010 2:27 PM | Report abuse

Warner has only been a Senator since 2009. Before being governor of Virginia, he was a businessman. Odds are he hasn't developed the sense of "chumminess/all in good fun" standards of decorum that other Senators have with each other and instead treats them like colleagues where they go out to dinner with each other than then relentlessly lie in public. And he's clearly irritating that they act like a bunch of dishonest, incompetent children rather than people who supposedly work for a living. We're never tolerate such behavior from co-workers, and there's no reason Senators should tolerate it from each other and refrain from calling it out.

Posted by: constans | April 14, 2010 2:34 PM | Report abuse

Just another way of the GOP saying YES we will support all your corrupt big bankers and
SCREW you little man

Posted by: racerdoc | April 14, 2010 3:22 PM | Report abuse

What Senator Warner fails to comprehend is that "The People" are fed up with the outrageous fiscal behavior of "all of our representatives."

Senator Warner and Senator Corker think that by developing a so called "bi-partisan" agreement that appears on the surface viable, they fail to understand that the American people are fed up with "All" the irresponsible spending they have implemented over the last nine and one half years (including, but not limited too the Democratic and Republican administrations).

Nearly all of the representatives and senators in congress spend, spend, spend like there is no tomorrow; and their “personal” spending on themselves and their staffs at taxpayer expense is unconscionable. Not one individual in America (that is not a member of congress) could or would spend the unlimited amount(s) of money they do to ensure that they receive the very best accommodations, the very best catering of food and drinks, the very best travel, and the very best salary and benefits.

We voted for Obama and regret it; and we will not make the same mistake again!

Posted by: marinervn6971 | April 14, 2010 4:05 PM | Report abuse

Thanks for reporting this. I agree that Warner speaking out is a relief; I keep waiting for more Democratic Congresspersons to do so. I also wonder why journalists don't ask them to indicate if they think statements like McConnell's are true or not and why. That seems like journalism 101 to me.

We are daily subjected to listening to the mandatory rants of McConnell and Boehner as if somehow that provides reporting; only when the substance is checked and either dismissed or substantiated has reporting occurred. Will we ever see those days again?

Facts also are helpful in encouraging all those angry folks out there to notice that facts are actually available.

Posted by: pbkritek | April 14, 2010 4:13 PM | Report abuse

It would be interesting if the Post would find out the economoic backround of the staff members consulted in preparing the bill as to those who are advising McConnell.

Posted by: lawdawg58 | April 14, 2010 4:23 PM | Report abuse

It would be interesting to find out the economic team consulted in preparing the bill as well as those Sen. McConnell consulted.

Posted by: lawdawg58 | April 14, 2010 4:38 PM | Report abuse

THE DEMOCRATS SHOULD WORK TO REMOVE AT LEAST TEN OF THE REPUBLICAN OBSTRUCTIONISTS IN THE SENATE AND THEIR COLLABORATORS IN THE HOUSE, LATER THIS YEAR , IN THE MID-TERM ELECTIONS!
THERE IS NO RATIONAL REASON TO BELIEVE THAT THE PARTY ACTUALLY " HAS TO " LOSE MEMBERS, IT'S TIME TO " BEAT THESE OBSTRUCTIONISTS , LIKE THEY STOLE SOMETHING ", STOP TRYING TO TIP- TOE AROUND "THE STINK ",THAT THESE FOOLS KEEP BRINING INTO CIVIL SOCIETY !

Posted by: YANKEE57 | April 14, 2010 4:39 PM | Report abuse

McConnell, Shelby and Bohner has all met with the bankers to assure them that they would "take care of them" and that they would stall passage of any financial reform legislation until next year. They have zero credibility, therefore, they are willing to deliberately spew total inaccuracies regarding the content of the legislation. The new "Death Panels" per their Lutz written talking points will now be "Reform is a 'bailout' for the banks" They have no problem whatso ever insulting public intelligence as they believe that the public lacks intelligence.

Posted by: xclntcat | April 14, 2010 5:43 PM | Report abuse

McConnell is an idiot and to think that the voters just re-elected this idiot for 6 more years is tragic.

Posted by: edgewatervince | April 14, 2010 5:55 PM | Report abuse

The first rule in writing a new financial regulation bill is "do no further harm". Because I have zero confidence in Obama or the Democrats in Congress, I am automatically suspicious even before I find out what's in it. Congress has been making one mistake after another since the 1970s; now they want to blame Wall Street for what was about 95% their doing. Maybe after they fix Fannie Mae and Freddy Mac, then they can do more. But if alll they're going to do is remove some of Goldman Sachs' competition, to reward that company for all the campaign contributions, then I say No way!

Posted by: JBaustian | April 14, 2010 10:02 PM | Report abuse

Very similar to yesterday's post.

Here's the question: are the American people really so cowed that they will accept a 4th bailout of Wall Street, sometime around 2017 or so by the current clock, in which the taxpayers (average income $47,000/year) prop up the Wall Street corporations whilst the executives of those corporations pay themselves $20 million bonuses? Because I see absolutely nothing being done which addresses the gigantic, absolutely gigantic, moral hazard that the current structure of Wall Street + bailouts has created.

sPh

Posted by: sphealey | April 14, 2010 10:05 PM | Report abuse

Did Klein once again take the word of those with whom he agrees?
Would it have killed him to have spoken to anyone in the GOP about the serious problems with this legislation?

This situation illustrates why the GOP is wary of working with the Democrats. Yes, they work together and then the Democrats throw out anything that the GOP negotiates.
The Democrats can publicly exclaim that the GOP is backing off of "their own" bill. It's all BS. The Democrats cannot be trusted.

Posted by: parkbench | April 15, 2010 1:10 AM | Report abuse

marinervn6971: "Nearly all of the representatives and senators in congress spend, spend, spend like there is no tomorrow; and their 'personal' spending on themselves and their staffs at taxpayer expense is unconscionable. Not one individual in America (that is not a member of congress) could or would spend the unlimited amount(s) of money they do to ensure that they receive the very best accommodations, the very best catering of food and drinks, the very best travel, and the very best salary and benefits."

This is off-topic, but I think it should be addressed. Most members of Congress do not live the high life. The pay, while well above the national median, is not that great considering the jobs they do, and most of them could be making a lot more doing something else. Many of them bunk together when they're in DC (Senator Schumer lives in a narrow row house with 3 other members of Congress, and I've heard the place is full of Chinese food take-out boxes). They're away from home and families and travel practically every weekend. It's simply not a great lifestyle.

There are interest groups that provide occasional high-end escapades. There are members who live well because they are already wealthy. But most live fairly modestly, and our tax dollars are not providing them with a lavish lifestyle.

Posted by: dasimon | April 15, 2010 10:09 AM | Report abuse

Did anyone ask Sen. Corker how he felt about Sen. McConnell's comments?

Posted by: bulldog6 | April 16, 2010 8:20 AM | Report abuse

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