Senate Agrees To Ban Taxpayer-Funded Bailouts

An amendment to the financial overhaul bill banning the use of taxpayer funds for bank bailouts has been agreed upon in the Senate, says the LA Times.

“If there’s one thing we should all be able to agree on, it is this: The American taxpayers should never again have to bail out Wall Street firms that gambled away our savings and wreaked havoc on our economy,” said Barbara Boxer (D-CA,) the senator who proposed the amendment.

As a compromise, another amendment was adopted that eliminated from the bill a $50 billion fund that would aid the government n liquidating companies. Opponents said the fund would only encourage more bailouts.

Senate OKs ban on use of taxpayer funds in bank bailouts [LA Times]


Edit Your Comment

  1. Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

    Hmmm… not sure what to say to this, honestly. Nice to see the little guy isn’t gonna be funding anymore bail-outs, I guess.


  2. What The Geek says:

    Oh, so then next time it won’t be called a bailout, it’ll just be called a “taxpayer funded recovery effort” or some such thing. Sweet.

    • magus_melchior says:

      They already did that– they called it the “Troubled Asset Relief Fund”. If the Senators’ staffs are literate (and they usually are), they probably worded it something like “Congress or the Treasury shall not give huge sums of money to banks.”

      • cerbie_the_orphan says:

        Which will be gotten around by the companies becoming something technically not a bank right after they tank…

  3. costanza007 says:

    wordplay… brilliant

  4. Mysterry says:

    Hey, how about returning that money now? THANKS!

  5. Thoreau says:

    Of course if they were right before the bailout and it saved the country from the second great depression then it is real smart to just tie everyones hands behind their backs and not even include the special fund that was supposed to help with the only fix left, liquidation. Just plain stupid!

  6. two_handed_economist says:

    Why is this being headlined? The Senate is just passing minor amendments to a bill.

  7. AstroPig7 says:

    Sweet! Theyߣre making a half-hearted attempt to close the barn doors after the cows have already run into the next state.

  8. mopman64 says:

    I smell something called November elections comming up real fast. Lets make it sound like we care and maybe all us overpaid fools will get reelected.

  9. TailsToo says:

    I’ll believe this when I see it – if the financial system is coming down, there’s no way that Congress will just stand aside and watch. Their whole way of gaining and keeping power rests on keeping things the status quo.

    If they were serious about reform, they would break up the big banks and ensure that they remain small enough so that the failure of one would not bring down the system. That would make it a lot harder to get campaign contributions, however.

    And as long as the Fed can keep funneling cheap or no cost money to the banks, they already have their bailout in place. How cutting off that source of funding, and make the banks compete for deposits by actually offering interest to savers? Right now, they have no need to do so, and that’s why no bank will offer more than 1.3%

    • moonjest says:

      Agree. This by itself does nothing to solve the problem that “wreaked havoc on our economy” and required action from the federal gov’t.

    • nova3930 says:

      Except that doesn’t work really well either. A whole bunch of little banks going tits up was the Savings and Loan Crisis of the late 80s early 90s.

      At some point you’ve just gotta let the SOBs fail and deal with the pain because the implications of the moral hazard of a bailout are much worse.

  10. Bativac says:

    “If there’s one thing we should all be able to agree on, it is this: The American taxpayers should never again have to bail out Wall Street firms that gambled away our savings and wreaked havoc on our economy.”

    Unless we, your government, decide that we need to do this again, in which case we’ll do it but call it something else.

    • leprechaunshawn says:


    • Excuse My Ambition Deficit Disorder says:

      If the government even tells us about it. They may have learned their lesson…never to tell the people even the slightest bit of truth. It’s much easier to just hold off in telling the people until the dust settles…let Tiger Wood’s truth telling be an example of what happens.

  11. Dean says:

    Another deal. Companies are harder to liquidate, but we aren’t directly giving them cash.

    This wont end the billions of dollars of corporate welfare or things like the 300bn dollar Iraq rebuilding that was directly funneled to US firms for little to no services.

  12. Blueskylaw says:

    I’m sure the Senate would also agree that it’s important to “save our drinking water”, but once the lobbyists get involved the Senate will somehow decide that the bill is really unfair to big corporations.

  13. leprechaunshawn says:

    So they’ve eliminated the fund that would aid the government in liquidating companies? Big deal! They’ll just take the money from somewhere else when it’s needed.

  14. KyleOrton says:

    Does this include funding companies through inflation-funded bailouts that affect the public from the bottom up?

  15. Loias supports harsher punishments against corporations says:

    Wow. Way to go, and have no function to allow the U.S. to wind down failing mega-corporations.

  16. Naame says:

    Well, the way I understand it (correct me if my facts are off) is that this doesn’t mean tax dollars won’t be used to help bail out a large bank in order to reduce the negative effects on the economy overall. The idea is that after the fact those banks will be required to pay for the whole thing and then some. The $50 billion fund was supposed to be like that, but part of the problem is that it would be paid up front meaning that banks could potentially (not sure if they actually could within reason) pass those expenses on to the consumers.

    That begs the question, “Well, why won’t they just do that anyways after they get bailed out and pay the fees?” My answer to that question (again, I am flexible to changing this if someone can educate me without flaming) is that the fee will only hit those banks needing the bail out funds. That means if they try to pass on those expenses to the consumers their competing financial institutions (other banks, credit unions, etc) will not need to do the same thing. In fact, that competition will likely see it as a competitive edge and advertise that if the consumer switches to their institution then they won’t have to fear such things.

    Overall, that scenario will also provide incentive for banks to try a lot harder to protect themselves rather than rely on government to much to float the bill. The negative consequences for keeping the status quo will be greater and hopefully it will be enough to help make next time easier. I say “next time” because pretending that any government can prevent such things indefinitely within a monetary system is a pipe dream. All they can do is reduce the negative impact on those involved who are innocent and that is exactly what our current government is trying to do.

    • Naame says:

      Ah! Further clarification from Politico. I was partially correct, but there are more details to consider:

      “With the $50 billion fund eliminated, taxpayers would still need to front billions of dollars to cover the costs of dissolving a troubled firm through a line of credit from the Treasury to the Federal Deposit Insurance Corp.

      Those costs would eventually be recouped by selling the firm’s assets, with creditors and shareholders forced to take losses. Assessing a fee on the banking industry would be used as a last resort. But until then, taxpayers would temporarily foot the costs of keeping the firm operating in the interim. “

  17. Naame says:

    Also, for those trying to learn about the Financial Reform bill, understand that this part of it is just one part of the bill. There are many other parts which the media isn’t covering with very much detail. For those interested in getting a reasonable overview from a source that isn’t media related please refer to this PDF:

    However, also note that some of the more recent changes were made after this PDF was created. Such changes include the ones talked about in this article as well as the details about the derivatives. Still it is a useful source.

  18. tashmn says:

    They’ll just fund it by increasing the money supply instead…

  19. kaltkalt says:

    That’s just pointless and a total display of suckup propaganda. One law cannot bar a later law. Law 1 cannot prevent law 2. The second law controls over the first law.

    So a bill passed on January 1 saying “no bailouts ever again” is meaningless when a bill is passed on February 1 giving a huge bailout to some bank.

    Plus, now that the financial industry knows it’s “too big to fail” and will get bailed out rather than politicians having to face constituents with lost jobs, lost savings, and a declined DOW, they have America by the vaginal hairs – they will hold us for ransom time and time again, losing more and more money each time on riskier and riskier activities. And they will get bailed out each and every time. When you pay a ransom, more people take hostages and ask for ransoms.

    We paid a ransom and didn’t even get anything in return. In fact, not only did we not get the hostage back, we paid a ransom and gave MORE hostages. We’re so stupid, we don’t deserve a prosperous economy.

    • Naame says:

      Read my comments above. I know they are long, but hopefully they will help provide more information.

      Also, we have not taught these institutions that they are now Too Big to Fail. They have know that for a very long time.

    • Mr. Pottersquash says:

      yea!!! enough though ours is pretty much most stable right now…

  20. Excuse My Ambition Deficit Disorder says:

    I think you may have forgotten some words in the headline….shouldn’t it read….

    ‘Senate Agrees To Ban Taxpayer-Funded Bailouts….For The Everday Taxpayers….Amendment Grants Continuing Bailouts for Corporate America’

    Guess it’s a little to long of a title isn’t it…

  21. Macgyver says:

    Let these corps. fail, they the one’s that are broke.
    You think if a regular person foreclosed on their house, the government would help them out by giving them a bailout? No.
    So why the hell should these big companies get a bailout?

    Let one company fail, then all these other companies see that the government isn’t helping. Then maybe, every other company will notice and start getting they shit together.

    • Naame says:

      The idea is to implement a procedure to let them fail in such a way that reduces the harm done to those who are innocent as much as possible should a large bank get to a point where failing is inevitable.

      The idea that we can simply let them fail with zero government involvement without destroying our country’s economy beyond repair is a pipe dream so long as we are depending on a monetary system. That “cure” is far worse than the disease.

      However, it is also a pipe dream that government has the power to permanently prevent financial melt downs, but they can do things which lessen the blow on those who are innocently impacted by such melt downs. Protecting the innocent citizens is part of our government’s responsibility.

  22. Bohemian says:

    As long as they also put some real regulations in place and break up the huge banks into smaller banks based on their line of business I am ok with this.

  23. pot_roast says:

    Funny, coming from Barbara Boxer D-CA – home of the “let’s bail everyone out” party. She’s making political hay because elections are coming up.

    • ARP says:

      Bush started TARP. Palin was for it before she was against it. Bush didn’t collect FDIC payments for years and continue to allow large banks to merge and get “too big to fail.” So, there’s plenty of blame to go around.

      • Ixnayer says:

        This is nothing more than something democrats can use in the elections. Thats it!

  24. Kid Awesome says:

    Wait, so is this their way of admiting they were wrong?

  25. Mr. Spy says:

    Oh My Glory! Is this a bypartisan reform bill!? Or are we going to find some inane detail to bicker about?

  26. Amy Remax says:

    one bailout too late

  27. howie_in_az says:

    Or they could just reinstate the Glass-Steagall act along with a shitton (metric) of additional oversight and stop messing around with these shenanigans.

  28. Ixnayer says:

    They also enacted a pay as you go system that requires funding be met before giving out money, yet they constantly find ways to go around it. This is nothing more than politics, something the dems can say in their campaigns, they don’t actually mean it.

  29. nutbastard says:

    “If there’s one thing we should all be able to agree on, it is this: The American taxpayers should never again have to bail out Wall Street firms that gambled away our savings and wreaked havoc on our economy”

    …what do you mean, ‘again’? it was OK the first few times? dicks.

  30. AngryK9 says:

    Better late than never I guess….since it’s already been done. We all know that the Fed tends to modify whatever laws it needs to modify to suit it’s own purposes, so it won’t stop it from happening again.

  31. barty says:

    Wow…Barbara Boxer and I actually agree on something.

    Businesses and governments (think Greece, California, Michigan, etc) will not change their mode of operation until they are allowed to fail. As long as these entities can come running to the Federal government for a handout, they’ll take the same stupid risks again and again.