Boxer's Anti-Bailout Fraud

Atlantic "editor-at-large" Michael Kinsley explained this week why the anti-bailout amendment touted by three-term incumbent Barbara Boxer is mostly a fraud. The amendment purports to "ensure that no taxpayer funds will be used to bail out financial institutions," according to Boxer's press release. Indeed, Boxer herself described it as an "ironclad assurance" that will "eliminate any doubts."
 
But, Kinsley notes: 

[T]here is no way, short of a constitutional amendment, that one Congress can restrain future Congresses from doing whatever they like, bailouts included.

In other words, it's all fine and good that 96 Senators--with one nay vote--posture and proclaim that they will never, ever use taxpayer funds to bail out Wall Street firms. That's easy to say. But what counts is what they would do if, as happened in late 2008, it looks as if the entire financial system is on the brink of collapse. Boxer's amendment does nothing to prevent them from voting for a bailout then, as they did in 2008. Kinsley writes: 

Are the 96 senators of both parties who supported the Boxer amendment convinced that there will never, ever be another financial emergency where a bailout might be the best of bad options? Forbidding bailouts is like forbidding chemotherapy, in the hope that somehow this will prevent cancer.

In 2008, Boxer voted for the TARP bailout. Now that she discovers it's unpopular she is trying to protect herself from the voters' anger by declaring for all to hear that she'll never ever do again what she did in the past.  

"This is a classic move by a scared incumbent pol--sponsor an essentially meaningless, for-show law and then make a big deal of it," said Mickey Kaus, the political blogger who is running against Boxer in the Democratic primary. "Boxer's amendment does nothing to prevent future bailouts. It has more to do with her poll numbers than accountability on Wall Street." 

The 96% Rule  

In general, said Kaus, there's almost an unwritten law that any bill that passes the Senate by a vote of 96-1 doesn't accomplish anything meaningful. "You can always get 96 Senators to cover their asses by posturing. You could not get 96 Senators to vote for a bill that actually restricted future bailouts." 

Kaus favors tighter regulation of Wall Street risktaking, including capital requirements and the Volcker rule (forbidding government insured institutions from trading for their own profit in speculative derivatives) and procedures favoring liquidation of failed institutions in ways  that actually punish those firms and their clients in a manner comparable to the rewards they reap if they succeed. But he's also honest enough to admit that this doesn't guarantee there will be no future bailouts should the new regulations be insufficient. 

"I would probably have held my nose and voted for TARP in 2008, just as Boxer did. We were facing a possible economic catastrophe. Boxer can defend that vote. She can't defend introducing an essentially meaningless piece of legislation that pretends to prevent her from making similar votes in the future, should the circumstances be dire enough. That's an insult to the intelligence of Californians. It shows she's an old-style pol through and through." 

— Mickey Kaus (310) 577-3141