James Pethokoukis

Politics and policy from inside Washington

‘A whole mess of crazy’ coming from Capitol Hill

November 20, 2009

That is how one Congress watcher from the financial industry describes the current state of affairs, from the Fed audit bill to calls for a transaction tax. I think this William Greider piece gets at the heart of it:

The center is not holding. … It feels like carnival time, when up is down and down is up, when humble folks parade as kings and queens and the reigning royals are dressed as clowns. … The most startling evidence of reversal is Chris Dodd, chair of the Senate Banking Committee, who has been a loyal friend of Wall Street and especially Connecticut-based insurance companies. Dodd proposes to strip the Fed of its regulatory functions because of its “abysmal failure” to protect the public, and to replace it with an overarching regulatory administration. …
Taxing Wall Street is a more provocative departure, but some representatives are warming to the idea, drawn to Oregon Representative Peter DeFazio’s appealing Let Wall Street Pay for Wall Street’s Bailout Act. A very small excise tax on all financial transactions–trading stocks, bonds and derivatives–could yield hundreds of billions in revenue. House majority whip Jim Clyburn suggests the securities tax is “a painless way” to pay for highways. …

Senator Bernie Sanders asks another one. If some banks are “too big to fail,” why not just make them smaller? His bill would require Treasury to identify and break up too-big financial institutions within one year. Goldman Sachs and JPMorgan Chase are reacting with alarm. They do not normally worry over the senator’s progressive thinking, but what’s dizzying is that former Fed chair Alan Greenspan has embraced the same concept. When the socialist from Vermont achieves bipartisan consensus with the right-wing Maestro, can Barack Obama be far behind?

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