Reid: GOP Claims on Financial Reform Don't Pass "Laugh Test"

On Saturday, President Obama ripped into Senate Republican Leader Mitch McConnell for making "the cynical and deceptive assertion" that the financial industry reform plan being pushed by Democrats is actually a "bailout bill."

Today, Senate Majority Leader Harry Reid echoed that pointed criticism, saying McConnell has been engaged in repeating "false claims" about the legislation. According to his prepared comments for a speech on the Senate floor, Reid said he agreed with Paul Krugman's characterization as Republican opposition as "shameless."

"Our bill protects taxpayers. It will not leave taxpayers with the tab, as the other side pretends," he said. "This bill is not a bailout. Republicans know that, though they refuse to say it." Reid said GOP claims the bill is not bipartisan "don't pass the laugh test" because it incorporates a number of Republican ideas.

Before Reid made the comments, his spokesman went even further, calling on McConnell to disclose what happened in a meeting he had earlier this month with Wall Street executives.

"Since Republicans appear to be conducting backroom negotiations with these same people who took our economy to the brink of collapse, the public deserves to know what secret deals and carve-outs Republicans are offering Wall Street executives in exchange for their support," said spokesman Jim Manley.

McConnell responded on the floor with a call to "focus not on personal attacks or questioning each other's motives, but on fixing the problems in this bill." Brian Walsh, the National Republican Senatorial Committee Communications Director, was not so restrained:

"If Harry Reid believes there's something wrong with meeting with business executives in New York City, then he should immediately explain to his Nevada constituents why he was scooping up campaign cash from Goldman Sachs just a few days ago at a backroom Manhattan fundraiser," he said. "One can only presume that Senator Reid will be returning these donations immediately along with the more than $1.1 million he's taken from Wall Street over the years. And if not, he should explain why not."

McConnell, who receives more money in donations from the "Finance, Insurance and Real Estate" sector than any other sector, according to the Center for Responsive Politics, has insisted he is working on behalf not of big Wall Street banks but rather community bankers in Kentucky.

Republicans' claims that the financial industry reform bill will, in McConnell's words, prompt an "endless taxpayer funded bailouts for big Wall Street banks" are tied to plans to create a $50 billion fund, financed not by taxpayers but banks, to dissolve failing financial institutions.

The White House has said the fund is not an essential part of the legislation, though Senate Banking Committee Chairman Chris Dodd says he does not want to eliminate the fund without creating another mechanism to wind down failing banks without cost to taxpayers.

The fact that fraud charges have been filed by the Securities and Exchange Commission against Wall Street titan Goldman Sachs, meanwhile, increases the chances that the bill will pass, according to Rep. Barney Frank, the chairman of the House Financial Services Committee.

"It reinforces the need for much of what we were doing," Frank said in an appearance on CNBC. He denied that the charges were filed now to help the legislation along.

That's likely not enough for Republican House Committee on Oversight and Government Reform Ranking Member Darrell Issa, who has been among the Republicans to question the timing of the filing.

"At a time when Democrats are attempting to advance punishing public policy masquerading as financial reform, Democrats are desperate to cast Wall Street as the villain so they won't be held accountable for the country's economic condition," he said. "It must be nice for the Democrats that the SEC's filing against Goldman Sachs so conveniently fits into their political agenda."

Republican Sen. Judd Gregg, who is on the Senate Banking Committee, suggested on MSNBC that Democratic attempts to use the Goldman charges to their advantage are "disingenuous."

"This is a single event, we don't even know what the outcome will be," he said. He added that "we should not legislate based on anecdotal events."

Forty-one Senate Republicans last week signed a letter vowing to oppose the bill unless it is changed, enough for a filibuster. But Democrats have been confident that they can get a bill passed and that they are on the right side of the politics of the issue, and have aggressively criticized the GOP as too closely tied to Wall Street.