I am absolutely confident that the bill that emerges is going to be a bill that prevents bailouts. That’s the goal,” Mr. Obama said before the start of the meeting, directly answering assertions by the Senate Republican leader, Mitch McConnell of Kentucky, that the bill would encourage, rather than prevent, future taxpayer bailouts of financial companies. As Mr. Obama spoke, Mr. McConnell sat impassively nearby in the Cabinet Room.Not only is there swift, strong pushback on Mitch McConnell's outrageous claim that giving regulators resolution authority to liquidate failing banks would encourage bailouts. Note also the signal that the administration (contra Andrew Leonard) will not be content with claiming victory on the headline issues (here, the resolution authority; previously, the consumer protection agency) while letting banking interests have their way on more arcane matters, like regulation of securitizations or derivatives. On the latter, there's this from Geithner:
Later, in a particularly pointed statement, the White House press secretary, Robert Gibbs, said Mr. Obama would not let the bill be thrown off course.
“The president reiterated his belief that we are open to ideas and eager to work with anyone who is willing to work with us regardless of party,” Mr. Gibbs said. “He also made clear that bipartisanship should not be equated with an openness to lobbyists, loopholes and special interest carve outs and that he would be unwilling to negotiate on some key issues, and that he could not accept bad policy in pursuit of bipartisanship.”
At his briefing, Mr. Geithner urged reporters to draw attention to the derivatives issue to help expose efforts “to weaken, to exempt, to carve people out of those basic protections.”Noam Scheiber picked up advance signals to this effect back on April 4 (my emphasis):
As one lawyer involved in the derivatives industry told me last week, “If they try to push the Dodd bill as currently written on derivatives—it can’t fly.”
What explains the serene confidence? “Derivatives is the tail on this dog,” the lawyer continued. “It’s not what’s going to drive the bill through Congress. Nor is it the filibuster point. Other stuff makes a lot more noise.” The bottom line, this person concluded, is that voters just aren’t very invested in the details of derivatives reform, and so it’s hard to believe the Democrats will be, too: “Words on the page are not that critical to the public. … The public just wants to see something done here. … To some extent, passing a bill [whatever the details] will be marketed as a success.”
Put this proposition to administration officials, however, and they do some bristling of their own. One official told me it was a case of Wall Street talking its own book: “They want to say it’s inevitable that things will be weaker” so as to make this outcome more likely. The flaw in the banks’ logic, this official explained, is that the importance of once- obscure issues like derivatives actually can be brought home in concrete terms. “I think it’ll be very straightforward to represent the choices to the American people: Keep going with the system that brought you the collapse of AIG and contributed mightily to the financial crisis,” or pass a tough-minded reform package.
And, in fact, not everyone on Wall Street is so convinced of the public’s indifference here. One industry lobbyist recently confided to me that, “Derivatives is so complicated that people don’t understand it, it’s tougher to message on that. But they do understand when you talk about something being totally unregulated.”
The move to cast McConnell as a tool of the banking lobby appears to be working:
But Mr. McConnell also struggled to answer accusations that Republicans were doing the bidding of big banks. Pressed by reporters to explain why major Wall Street companies were so strongly opposed to the legislation if it would guarantee future bailouts for them, Mr. McConnell did not answer directly but said that community banks in his home state of Kentucky also opposed the bill.Not exactly a ringing denial, that.
Asked directly if Republicans were acting on behalf of big banks, Mr. McConnell replied, “I’d say that’s inaccurate.”
UPDATE 4/16: The Plum Line confirms the change in tone and approach:
A Dem party source emails that the White House is preparing to go on offense against Mitch McConnell and the “lies he’s spreading on Wall Street reform. We’re not about to let them get away with planting the seeds of these bogus claims with the public the way they did for a time on health reform.”