Wall Street Still Doesn't Love the GOP

[futurebeachbum]

From todays WSJ: Wall Street Still Doesn't Love the GOP, Bankers understand that Dodd-Frank has written 'too big to fail' into law. So do the tea partiers.

the big bankers are planning once again to return to Mr. Obama's side for 2012. Maybe not to the same degree as in 2008, when Goldman Sachs employees gave more donations to the Obama campaign than any other organization except the University of California

Meanwhile Wall Street and the banks?for all their fussing over Dodd-Frank or the Volcker Rule's tighter restrictions on speculative trading?have been enormously profitable since 2008, thanks to the Federal Reserve's near-zero interest rate policy and a host of guarantees and other programs that have remained in place well into the first two years of Mr. Obama's term. These include protecting firms such as Goldman Sachs and Morgan Stanley as too-big-to-fail, guaranteeing the banks' debt and subsidizing the purchase of toxic assets from their balance sheets with taxpayer funds, even as the Fed purchased mortgage debt in the open market, thus propping up the prices of these bonds.

The tea party recognizes that Dodd-Frank makes even cozier the already-tight relationship between big government and Wall Street, not just through increased regulation but because "too big to fail" (the notion that the big banks are too important to be allowed to die if they bet wrong in the markets) has been essentially codified into a law that the president touts as the answer to Wall Street's greed.

Under Dodd-Frank, for example, the FDIC has tremendous power to unwind the liabilities of banks that have gambled so poorly and lost so much money that they pose what is deemed a "systemic risk" to broader markets and the economy, rather than allowing them and their creditors to face the ultimate consequence for bad bets by being wiped out in bankruptcy. And nowhere does it say in the law that companies deemed so large and systemically important by all the new economic bureaucrats in Washington can no longer receive protective bailout money as they did in 2008 under the Troubled Asset Relief Program.

I guess the belief is "If it is good for The Street, then its good for America".

As we approach the mid-point of this recession, I really struggle with that. I still think "too big to fail is just too darn big."