Op-Ed: Dems Financial Reforms Make Taxpayer-Funded Bailouts Permanent

Op-Ed

It may be cold and flu season, but there's another illness that's afflicting almost every West Virginian I talk to: bailout fatigue.

Taxpayers across our state have seen Congress funnel $700 billion to Wall Street banks through last fall's Troubled Asset Relief Program (the original financial bailout).

They've seen the Federal Reserve Bank commit trillions more to prop up insurers and other financial institutions. Tens of billions of government dollars have gone to subsidize poor decisions by American auto-manufacturers.

And to top it all off, as taxpayers keep the financial world afloat, Wall Street bonuses continue to flow.

Given this backdrop, West Virginians could be forgiven for thinking that the Democrats' financial regulatory reform bill will finally put an end to a bailout mentality that puts hard-working taxpayers on the hook for Wall Street mistakes.

Unfortunately, the opposite is true.

Instead of heeding calls to end TARP and protect taxpayer dollars, legislation to be debated on the House floor this week will actually make this bailout culture permanent.

Put simply, the Democrats' bill codifies authority granted to both the Treasury Department and the Federal Reserve to throw future taxpayer-funded lifelines to big banks and financial giants. As California Democrat Rep. Brad Sherman candidly put it, this legislation is little more than "TARP on steroids."

Rather than sending a message that business decisions have consequences and that taxpayer dollars won't be there to clean up Wall Street's mess, the Majority's bill will grant special - protected - status to the very firms which created last fall's financial implosion.

This is far from change we can believe in.

Yet, how do the Democrats plan to pay for these bailouts? They create a $200 billion fund with new taxes on financial institutions, taxes that will inevitably be passed straight on to consumers.

What's more troubling is the fact that billions more taxpayer dollars could be shelled out if this fund is exhausted with future bailouts.

Not only will these new fees cost jobs and slow lending when our small businesses need it most, but there's no limit to the liability taxpayers could face with new Wall Street bailouts.

These new fees, higher taxes and diminished access to lending will only hamstring small business' ability to invest, grow and hire. Such a growth-inhibiting plan strikes me as a poor prescription, particularly in the face of a feeble economy and an anemic job market.

Instead of the Majority's medicine which rewards those who helped cause the economic crisis, Congress should go back to the drawing board and bring forward a plan that provides real taxpayer protection, ensures market stability and emphasizes the need for business responsibility.

I believe the Republican alternative provides just such a way forward.

Our legislation - introduced earlier this year - will truly put an end to taxpayer-funded bailouts.

We'll protect consumers with increased investment fraud enforcement and we'll monitor systemic market risk through improved coordination between regulators. Finally, we'll provide market certainty by making it clear to Wall Street that no firm is "too big to fail." Under our plan, failed firms will face the consequences of their poor decisions in the bankruptcy process just like anyone else.

Let's be clear. Nobody questions the need for meaningful reform of our financial regulations, but more bailouts and new taxes don't qualify as such a plan.

*** Rep. Shelley Moore Capito represents West Virginia's Second Congressional District in the U.S. House of Representatives. She also serves as the Ranking Republican on the House Financial Services Subcommittee on Housing and Community Opportunity. ***

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