"The amendments to the Dodd bill will not end bailouts and government takeovers. Instead they will be institutionalized for all time. The Senate must defeat this horrendous legislation."—Bill Wilson, President of ALG.
May 13th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today blasted the Dodd-Shelby amendment to the Dodd financial takeover bill that passed last week "which leaves in place the authority for unlimited government takeovers and bailouts paid for by the American people through assessments levied upon financial institutions."
ALG today updated its comprehensive backgrounder, "Down a Rabbit Hole," on the dangers the legislation represents.
"Nothing has substantively changed. Despite the efforts of Senate Republicans, the orderly liquidation fund still has not been removed. After all the amendments voted on, the government can still seize any institution it wants, and then keep it, reorganize it, or redistribute it without any Congressional approval," Wilson declared, urging Senate Republicans to filibuster the measure.
The Dodd bill, even with the Dodd-Shelby amendment, creates an unlimited "orderly liquidation fund" financed by assessments on approximately 60 bank holding and insurance companies that Wilson said "will be paid for by any American that uses the financial system through higher costs of transactions, bank fees, and the like."
According the ALG backgrounder, "Although the Dodd-Shelby amendment provides that the assessments may be charged to the bailed out or seized company to recoup the costs of the bailout or takeover, they may not be imposed if such payments were 'necessary to initiate and continue operations essential to the implementation of the receivership or any bridge financial company.'"
The backgrounder continues, "Those funds would be drawn from FDIC-levied assessments on the $50 billion or greater companies. This feature necessarily provides for bailouts, and makes the fund unlimited and permanent, because as it is used up, the FDIC can just charge the banks more assessments without any Congressional approval to bail out or seize more companies."
"The American people have not been told the truth about amendments being voted upon in the Dodd bill. The bailouts and government takeovers are still included," said Wilson.
The Dodd-Shelby amendment overwhelmingly passed the Senate last week 93 to 5 under the premise that it would end bailouts.
The backgrounder also describes one of the mechanisms for bailing out a company under a new name in the Dodd bill: "Conceivably, when the FDIC seizes a company, it could use the Fund to fully pay back all outstanding liabilities to the company's creditors, turn the company into a bridge financial company, fully recapitalize it with financing from the Fund, and then sell the capital stock to those very same creditors that were bailed with the Fund."
The backgrounder continues, "That's a bailout, and neither the Dodd-Lincoln substitute amendment, the Dodd-Shelby amendment, nor the Boxer amendment would remove any of these provisions."
Previously Wilson had criticized so-called "taxpayer protections" that were included in Boxer Amendment: "The Boxer amendment is meaningless, because the allegation is not that the American people will pay for these bailouts and takeovers via income and other taxes. It is that the American people will pay for these government takeovers and bailouts through higher costs on financial transactions and other fees levied by the financial institutions."
Wilson had said Boxer's amendment to require that the assets of companies put into receivership are "liquidated" was also "meaningless, because under the orderly liquidation fund, the FDIC has unlimited capacity to either sell seized companies to the Treasury, to reorganize them, or to be redistribute their assets to politically-favored entities."
On April 29th, Senator Dodd assured his colleagues that the bill did not contain bailouts, but that he would accept an amendment from Boxer affirming his position. Senator Boxer said on April 30th, as she submitted her amendment, agreed with Dodd that her amendment was unnecessary, but that she was offering it anyway.
Wilson asked, "If the Dodd bill does not contain bailouts, then why did Boxer submit an additional amendment to affirm that position? Why did Senators Shelby and Dodd submit an amendment that claimed to end bailouts?"
According to the preamble of the Dodd-Shelby amendment, it would "end 'too big to fail' [and] protect the American taxpayer by ending bailouts."
Wilson said, "Provisions in this bill that create an unlimited 'orderly liquidation fund' and the creation of 'bridge financial companies' give the government unlimited authority and resources to seize companies and either nationalize, bail out, or redistribute their assets to favored political classes, in spite of the many hollow amendments that have been voted on."
"The amendments to the Dodd bill will not end bailouts and government takeovers. Instead they will be institutionalized for all time. The Senate must defeat this horrendous legislation." Wilson concluded.
"'Down a Rabbit Hole:' The Threat Posed by the Dodd Bill to the Private Sector," Updated May 13th, 2010, Americans for Limited Government.
Letter to the U.S. Senate, ALG President Bill Wilson, April 26th, 2010.