Mitt Romney won the debate, again. But the former Massachusetts governors response on financial bailouts — past and future — was a muddle.
Bloombergs Julianna Goldman asked the question:
Governor Romney, its 2013, and the European debt crisis has worsened. Countries are defaulting. Europes largest banks are on the verge of bankruptcy. Contagion has spread to the U.S. And the global financial system is on the brink. What would you do differently than what President Bush, Henry Paulson, and Ben Bernanke did in 2008?
Romney had a terrific opportunity here. He could have said:
As president, Ill make sure that what happened in 2008 never has to happen again.
TARP and other bailouts are not in the past. The bailouts have done incalculable damage to the nation.
This harm cant be counted up in TARP dollars. Rather, its the harm thats been done to our priceless free markets when some companies dont have to play by free-market rules. Just as General Motors and Chrysler shouldnt have been bailed out, neither should have AIG and Bank of America.
Its governments job to make sure that long before a financial crisis happens, the rules are in place to allow any company, no matter how big or how small, no matter whether its in the financial industry or the tech industry, can succeed or fail. We didnt do that in the years before 2008. By the time of the bailouts, it was too late.
As president, Ill make sure that the rules are in place to limit borrowing in the financial industry, and to limit the obligations that financial firms can take on through complex derivatives, so that the U.S. taxpayer never again has to save a particular company — or its bondholders or other creditors — in order to try to save the financial markets.
When Im president, Ill work to make sure that the next time that a large bank or insurance company in America fails — and it will happen — you can be sure that the companys bondholders and other investors will take the hit, so that taxpayers dont have to.
Instead, Romney tried to wiggle out of the question until he accepted that, as Julianna Goldman put it, another financial meltdown is a “very real threat” that voters really do think about.
Then he said something strange about Greece: “Are they going to default on their debt, or are they not? Thats a decision which I would like to have input on if I were president of the United States.” The only way to have “input” on such a decision, though, would be to pony up bailout money for Europe.
Then Romney said that “No one likes the idea of a Wall Street bailout. I certainly dont.” That was hardly a resounding commitment. No one likes a root canal, but sometimes one is necessary.
Romney used this root-canal language again when debate moderator Charlie Rose asked point-blank if “there is no institution, no financial institution, that is too big to fail.”
“Well, no. You dont want to bail out anybody,” the governor said. He then added that its a “terrible idea” to “protect the shareholders.” But shareholders werent the force behind the 2008 bailouts. Bondholders and derivatives counter-parties were.
Romney said further — in the passive voice — that “action had to be taken” in 2008, but that “Were there some institutions that should not have been bailed out? Absolutely.” The institutions he mentioned by name, though, were auto companies, not, financial firms.
All in all, the audience got:
- • a confused defense of the Bush administrations 2008 actions;
- • a failure to acknowledge that though those actions may have been necessary, the countrys failure to create a consistent system through which large banks can fail continues to poison the economy to this day;
- • a failure to explain how to make sure that it doesnt happen again; and
- • a stab at standing up for free markets when it comes to specific car companies but not when it comes to specific financial companies.
Romney is doing well, and getting better every day. A half-hour later, he gave a good answer on China. He said that Americas failure to ensure that China plays by the rules means that we “will get run over by China, and thats whats happened for 20 years.”
The governor should sharpen his answer about the nations failure to ensure that financial firms, too, play by the rules. His response on Wall Street should be as clear and strong as his position on China. It will come up again.
Original Source: http://www.nationalreview.com/corner/279920/governor-romney-and-too-big-fail-nicole-gelinas