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The weirdness of the Scott Brown compromise

PH2010050103572.jpgI'm not certain I've done a very good job expressing just how weird last night's Scott Brown compromise was, but Daniel Indiviglio hammers the point home in a post this morning:

Conference reconvened due to the protests from centrists Republicans in the Senate who didn't like the idea of taxing the big banks and hedge funds. Instead, taxpayers will pay for the regulation, since any TARP money unspent was supposed to go towards paying down the deficit. Those billions of dollars that would have been wiped out of the deficit will now have to come from the American people. Any money from higher bank assessments will ultimately cost consumers too, since banks will just pass on the expense to them through higher fees.

These Republicans have made a very strange choice. They decided to lighten the load on big banks, some of which will now just have to pay slightly higher assessments. Meanwhile, investment banks -- like Goldman Sachs -- will virtually escape the expense entirely, since they have few deposits. Hedge funds avoid the cost completely. Even though a tax on big banks might have been an economically questionable decision, it's hard to see how pushing the tax to average Americans and smaller banks helps matters.

If these Republicans were really concerned about a tax, then they should have demanded spending cuts to fill the gap or scaled back some of the expensive regulation that the bill calls for. The only ones who benefit from this change are big banks and hedge funds. Taxpayers and community banks are indisputably worse off.

To be fair to Brown, his original statement did specify spending cuts. But though it's not impossible to find $19 billion lying around, it's also harder than it looks: Congress wants to do lots of things that cost money and so tends to be pretty good at grabbing any easy money that's fallen between the federal government's couch cushions. There are programs that some people believe to be bad programs (liberals see plenty of these in the Defense Department, and conservatives tend to be down on the Department of Education), but these programs also have powerful backers, and so cutting their budgets tends to be difficult.

Instead, we've got this compromise, which as I wrote yesterday, raises taxes and takes capital out of the banking system, which is what Brown said he didn't want to have happen, but does so in a slightly different way, and to slightly more sympathetic targets, than was originally the case.

Photo credit: Linda Davidson/The Washington Post.

By Ezra Klein  |  June 30, 2010; 10:10 AM ET
Categories:  Financial Regulation  
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Scott Brown just announced that he isn't supporting the Financial Reform Bill yet, even with the changes last night. He will study it during the July recess.

Though Ezra claims this is a "Republican compromise" all Republicans opposed it, and no Republicans have publicly supported it, including Brown, Collins or Snowe. That is some "Republican Compromise" . .I bet it was to gain the vote of Evan Bayh anyway.

Posted by: mitchflorida | June 30, 2010 10:31 AM | Report abuse

I don't think it's weird at all

Posted by: JakeD2 | June 30, 2010 10:32 AM | Report abuse

what is weird about the GOP taxing middle and low income and letting the billionaire hedge fund managers completely off the hook?
that's business as usual for the GOP

Posted by: newagent99 | June 30, 2010 10:47 AM | Report abuse

Sen Scott Brown is just another bankster...

Posted by: mckibbinusa | June 30, 2010 10:47 AM | Report abuse

Yes, but now Brown gets to preen as a dealmaker. And that's priceless.

Thanks, Massachusetts.

At least he won't make the Sox cry.

Posted by: pj_camp | June 30, 2010 11:57 AM | Report abuse

It makes perfect sense. Brown's constituents are big banks, Goldman Sachs and the hedge funds. They got what they wanted, and put smaller banks in a less competitive position to boot.

The GOP doesn't give a flying fig about deficits. They just use that as a way to complain about policies that either they don't like or that don't benefit their friends and donors. It is quite simple. Stop being so naively astonished about it.

Posted by: Mimikatz | June 30, 2010 12:14 PM | Report abuse

If you were a Scott Brown backer (which I am not)...couldn't you make the case that TARP funds will not necessarily go towards paying down the debt. I know Democrats have suggested using those funds for stimulus in the past.

How can we be so sure that TARP funds would be used for deficit reduction.

Posted by: Mazzi455 | June 30, 2010 12:17 PM | Report abuse

And unfortunately most Scott Brown supporters will never understand what has really happened here. All they hear is that he refused to vote for it because of "higher taxes" (in actuality fees on large banks) and they think he is doing a good thing. It is very frustrating.

Posted by: donnitas | June 30, 2010 12:32 PM | Report abuse

Why did this bill cost so much money anyway that it had to paid for via taxes? Shouldn't a financial reform bill be relatively cheap??

I'd much rather see the FDIC rates go way up than put an tax on transactions- which is going to be incredibly onerous to implement and doesn't do anyone any good.

Posted by: staticvars | June 30, 2010 12:58 PM | Report abuse

Isn't the simplest explanation that Scott Brown just really doesn't know what he's doing?

Posted by: JEinATL | June 30, 2010 1:06 PM | Report abuse

"Isn't the simplest explanation that Scott Brown just really doesn't know what he's doing?"

Occam's razor at work. I don't expect this big bank favoritism is going to go over well with most voters. Perhaps it plays in Massachusetts?

Posted by: Kevin_Willis | June 30, 2010 2:42 PM | Report abuse

Kevin, would that you were right. Unfortunately, I think donnitas is right that most people will only hear a small bit of this story, that Sen. Brown got a change in the bill because he didn't like something related to new taxes. It'll sound both like he's fighting for lower taxes for normal folks and is a power player in DC.

But I think the most likely explanation is that he doesn't know what he's doing.

Posted by: MosBen | June 30, 2010 6:47 PM | Report abuse

Here's the outsider that Mass. conservatives voted for....he works for the big banks and steps on the little people, but by gummit, he didn't vote for Obamacare!!

Posted by: massmedia77 | July 1, 2010 3:12 PM | Report abuse

Ezra Klein the leftist hack is misstating Scott Brown's position. Brown has not announced either his vote or that he endorses any compromise.

Klein writes down his own speculation and presents it as a news event that has already happened. Pathetic.

Posted by: screwjob16 | July 1, 2010 4:40 PM | Report abuse

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