pudge's Journal: Bellingham Herald's Taylor Falsely Says Bailout Claim Not "The Truth"

Sam Taylor over at The Bellingham Herald quotes a John Koster press release titled "Larsen Votes to Create Permanent Bailout Culture."

Taylor says, "I've already blogged on here that the truth is far different, that the verbatim language of the measure sets up mechanisms for the institutions themselves to pay for any restructuring (not taxpayers). The New York Times also has a good, in-depth piece on how that restructuring works, too, over here."

But the problem is that -- as that very New York Times piece clearly points out -- "The bill will still allow the government to fashion ad hoc remedies in the case of a failing financial institution. ... [I]t appears there is enough wiggle room in the bill and elsewhere in the laws that the government will still be able to structure unique one-off solutions in any financial crisis." The taxpayers, according to the NYT article, very well may be on the hook: "Even if it is not money, backdoor federal assistance in one form or another may arguably still be provided to other parties to permit them to arrange a private deal."

Taylor ignores those facts and instead hyperfocuses on two things: the phrase in Koster's press release headline (which does not even appear in the text of the press release) that Rick Larsen voted "to create permanent bailout culture," and that the bill sets up a system so that the taxpayers won't foot the bill. As to the latter, the NYT piece addresses it sufficiently to make the point: "there are provisions that would still encourage government deal-making," and "while the bill forbids the use of taxpayer money to 'prevent the liquidation of any financial company,' there is always latitude in times of crisis to stretch the law as was done during the financial crisis." To argue that there won't be bailouts still happening just doesn't pass the smell, laugh, or fact test, and even his own link to the NYT says Taylor is wrong. Yes, going through restructuring in the bill might not result in taxpayer funding, but there's many other ways to provide "assistance."

As to the former, what Koster's press release actually said was the bill "will likely open the door for permanent taxpayer-funded bailouts for Wall Street." Far from being not "the truth" -- given the fact that even the NYT says that deal-making, wiggle room, ad hoc remedies, latitude, and backdoor assistance will still encouraged, allowed, and arguably still provided -- it's a perfectly reasonable belief to have. We know from history that "give an inch, take a mile" is the rule of the day in DC, as in most political circles. Believing that if they can bail out, they will bail out, is not remotely unreasonable.

If you believe bailouts are good, fine. But let's not pretend that -- like Obama said -- this bill prevents them from happening, or that it is somehow not "the truth" to believe that, under this bill, bailouts will be encouraged.

Cross-posted on <pudge/*>.