The Death Panel

Republicans like Mitch McConnell finally have a "Death Panel" to rail against, but this time they're calling it a "taxpayer bailout."

Here's the chain of events: A bank is judged failing. The FDIC submits a plan for the bank's liquidation -- which includes firing management, wiping out shareholders, handing losses to creditors, and selling off the firm -- and gets it approved by the Treasury secretary. Then the FDIC takes over the banks. The $50 billion fund is used to keep the lights on while all this happens. It's there to prevent taxpayers from having to foot the bill for the chaos that will occur between when we recognize a bank is failing and when we shut it down.

Whatever you want to call this, it isn't a bailout. It's the death of the company. And the fund is way of forcing too-big-to-fail banks to pay for the execution. But stung by Republican criticisms, the administration is telling Democrats to let the fund go. And they're not all that unhappy to see it die. "The fund isn’t a priority for the Obama administration," reported Business Week, "which instead proposed having the financial industry repay the government for the cost of disassembling a failed firm, an approach preferred by the industry."

So let's just be clear: The alternative to the liquidation fund is Wall Street's preference. That should tell you pretty much all you need to know about whether the industry really views this as a bailout.

On the Senate floor yesterday, Bob Corker, who's been unfailingly respectful of his colleagues' criticisms of the bill, had enough. "This fund that’s been set up is anything but a bailout," he said. "It’s been set up to provide upfront funding by the industry so that when these companies are seized, there’s money available to make payroll and to wind it down while the pieces are being sold off." The only question, Corker said, was whether you pre-fund by taxing the banks, which is what the Republican head of the FDIC wants and the bill does, or whether you post-fund by recouping taxpayer losses after the fact, which the Treasury Department and the industry prefer.

That -- and not bailouts -- is the debate. And by demonizing it, Republicans will force Democrats to retreat to the post-funding structure that was the original preference of both the Obama administration and the financial industry. That's not really a strike against future bailouts, though it might be something you promised a roomful of bankers you'd do on their behalf.

But, of course, I'm sure that Susan Collins can be persuaded...