Wall Street Reform Update
FACT CHECK: Wall Street Reform Will Prevent Taxpayer Funded Bailouts
What Republicans are saying: Wall Street reform legislation will put in place permanent bailouts.
Who’s the latest to say it:
Rep. Shelley Moore Capito (R-WV): “The majority has decided once again to turn a deaf ear to America’s cries to end the bailouts.” [House Floor, 6/30/10]
Here’s the truth: This bill puts in place a financial system that is required to be more accountable and transparent. Financial institutions will bear the full cost of unwinding any failing institution, so under this bill, the Bush-era days of taxpayer-funded bailouts are over.
This bill establishes a process to dissolve failing large financial institutions in a way that does not wreak havoc on the whole economy; there are no bailouts. These financial institutions will be allowed to fail in an orderly way to protect the economy. Under this authority, federal regulators will shut down any failing institutions that pose a risk to the financial system and our economy. Executives and management will be fired, shareholders will be the first to see the value of their stock wiped out, the company’s assets will be sold, and taxpayers and the financial system will not suffer from collateral damage. For markets to function, those who invest and lend in those markets must know that their money is actually at risk if it is not managed prudently. Financial institutions and investors must be responsible for the risks they take. Any costs incurred in unwinding these financial institutions will be borne by Wall Street firms and the big banks—not taxpayers.
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