The new non-bank resolution authority might provide the answer that the Republican frontrunner is looking for
In presidential debates, truly revealing moments are tough to come by. Often, candidates just rely on well-rehearsed responses or deflect questions entirely. That's why I found it so interesting to see Republican frontrunner Mitt Romney deviate from the rest of the pack and support a very unpopular position during Tuesday night's GOP debate: that the Wall Street bailout was necessary.
Many Republicans, particularly those who sympathize with the Tea Party, think the bailout was a tragic mistake. Romney, on the other hand, just says that he wishes the bailouts would have been done differently. What he may not realize, however, is that the more favorable outcome he describes might have already been made possible through last summer's Dodd-Frank financial regulation bill.
What Romney Said
Let's go straight to the transcript. Here Bloomberg TV White House Correspondent Julianna Goldman asks Romney about what he would do if faced with another U.S. banking crisis due to a European financial collapse. (It's just a precious coincidence that someone with the last name "Goldman" is asking about bailouts.) I'll start mid-answer, with Romney's general bailout philosophy:
MR. ROMNEY: . . . But I can tell you this. I'm not interested in bailing out individual institutions that have wealthy people that want to make sure that their shares are worth something. I am interested in making sure that we preserve our financial system, our currency, the banks across the entire country, and I will always put the interest of the American people ahead of the interests of any institution.
MS. GOLDMAN: But -- so would you -- so would you or would you not be open to another Wall Street bailout?
MR. ROMNEY: Well, no one likes the idea of a Wall Street bailout. I certainly don't.
MS. GOLDMAN: But you said in 2008 that it prevented the collapse of the financial --
MR. ROMNEY: There's no question but that the action that President Bush and that Secretary Paulson took was designed to keep not just a collapse of individual banking institutions but to keep the entire currency of the country worth something and to keep all the banks from closing and to make sure we didn't all lose our jobs. My -- my experience tells me that we were on the -- on the precipice and we could have had a complete meltdown of our entire financial system, wiping out all the savings of the American people. So action had to be taken.
Was it perfect? No. Was it well-implemented? No, not particularly. Were there some institutions that should not have been bailed out? Absolutely. Should they have used the funds to bail out General Motors and Chrysler? No, that was the wrong source for that funding.
But this -- but this approach of saying, look, we're going to have to preserve our currency and maintain America and our financial system is -- is essential.
To review, Romney believes that government intervention is sometimes necessary to prevent the financial system from collapse. But he also believes that some institutions should fail in the process.