Right-wing media conspiracy theory: Obama administration coordinated SEC Goldman charges to gain support for reform

Erickson accuses administration of “colluding to destroy Goldman Sachs.” In an April 19 RedState.com blog post, titled, “Is the White House, SEC, and DNC Colluding to Destroy Goldman Sachs to Pass Financial Reform?” CNN contributor Erick Erickson claimed there were “seriously troubling questions about the level of collusion between the SEC, White House, and DNC to get Financial Reform passed.” Erickson added: “This is serious stuff. Just ask yourself what the reaction in the media would be if the Bush White House had done this.” Erickson summarized the “timeline” of events and accused the Obama administration of “using the full arms of the government, including quasi-independent government agencies, and outside interest groups to create bad guys with which to pass ever creeping socialist reforms that will continue to cripple innovation in this country.”

Varney: “The timing is absolutely perfect. Wall Street looks very bad.” On the April 19 edition of Fox News' Fox & Friends, Fox Business Network host Stuart Varney said “the timing is absolutely perfect. Wall Street looks very bad. It looks like Wall Street really was responsible for the panic of '08, just days before the politicians attempt to put a collar on Wall Street, reform it, root and branch, and really get it under control. The timing is absolutely perfect. It has shifted public opinion even more in favor of really solid reform of Wall Street and made Wall Street even more unpopular than it was a week ago.” Varney claimed it was “very likely” that we would see other banks accused of wrongdoing to, “keep up the political pressure.” During the segment, Fox & Friends aired on-screen text stating, “Charges a ploy for support of reform?” and “Just a coincidence?: Goldman charged as WH pushes reform bill.”

Big Government: “The Obama Administration, once again, is in need of a villain to serve as a political piñata.” On April 19, Big Government called Goldman Sachs “Obama's newest villain.” The post claimed: “The Obama Administration, once again, is in need of a villain to serve as a political piñata, and it is now clear that Goldman Sachs has been selected to fill the villain void.” Big Government also claimed, "[J]ust as Financial reform was crawling on its belly, going off to die, the 'crisis' with Goldman Sachs suddenly occurred. How remarkably convenient! Suddenly, the financial reform legislation has new life, and a pitchfork campaign to further demonize Goldman Sachs is in full gear."

New York Post: “Wall Street suspects Goldman charges 'not coincidental' to financial reform effort.” On April 16, the New York Post wrote in a blog post, “Wall Street is more than a little suspicious of today's charges by the Securities and Exchange Commission, which has accused Goldman Sachs of lying to investors about who was really behind junk mortgages securities it sold to clients. Barclays banking analyst Roger Freeman comes right out and blasts the SEC effort as 'a well-timed, and perhaps not coincidental, effort to sway some on-the-fence Republicans' to get tough on financial reform."

Drudge: “Wall St suspects GOLDMAN SACHS charges 'not coincidental' to financial reform.” The Drudge Report linked to the New York Post article under the headline “Wall St suspects GOLDMAN SACHS charges 'not coincidental' to financial reform effort”:

Right-wing media also claims banks “would be enriched” and benefit from “permanent bailout fund” in financial reform

CEI blog: “Obama-Dodd financial bill would further enrich Goldman Sachs.” On April 18, Drudge linked to a post on Openmarket.org-The Competitive Enterprise Institute's blog which is devoted to “free markets & limited government”-- which claimed that financial reform legislation would “further enrich Goldman Sachs.” The article also claimed that the “permanent bailout fund...would be used to frequently give creditors of this firm a better deal than they would have in bankruptcy,” and that “the fees for the Dodd bill's resolution fund that would pay off a failing firm's creditors would come not just from banks but from a broad array of Main Street businesses. ... This would raise prices and cost Main Street jobs.”

Power Line: Financial reform “perhaps, is the payoff the Street has been waiting for.” On April 17, the right-wing Power Line blog also called the financial reform bill a “permanent bailout.” The blog posted a memo from economist Larry Lindsey which said Wall Street firms “will permanently benefit from having lower borrowing costs thanks to these provisions.” The post went on to claim that “Wall Street has supported Democrats two-to-one over Republicans in recent campaign cycles. This, perhaps, is the payoff the Street has been waiting for.”

In fact, rather than encouraging “bailouts” for failing financial firms, Dodd bill would establish authority to “liquidate” them

Wash. Post's Klein: “The Dodd bill makes bailouts less likely.” Addressing “the Republican attack” that the financial regulation bill creates a “permanent bailout,” The Washington Post's Klein wrote:

The Dodd bill makes bailouts less likely by empowering regulators and increasing transparency, raises a $50 billion fund from banks to pay for future too-big-to-fail bankruptcies, and then makes the outcome a predictable punishment rather than a chaotic rescue. That last is known as “resolution authority” -- as bloodless a word as one could possibly imagine -- and it wipes out both shareholders and management. It's all there in Section 206 of the bill: “Mandatory Terms and Conditions for All Orderly Liquidation Actions.” What we call “resolution” would better be described as “execution.”

Bill calls for orderly “liquidation” of failing financial companies, not bailout. Dodd's bill calls for the government to have the “necessary authority to liquidate failing financial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such risk and minimizes moral hazard,” including a $50 billion liquidation fund, paid for by industry assessments, to finance the orderly liquidation of large financial services firms. It further states that this authority:

[S]hall be exercised in the manner that best fulfills such purpose, with the strong presumption that --

(1) creditors and shareholders will bear the losses of the financial company;

(2) management responsible for the condition of the financial company will not be retained; and

(3) the Corporation and other appropriate agencies will take all steps necessary and appropriate to assure that all parties, including management and third parties, having responsibility for the condition of the financial company bear losses consistent with their responsibility, including actions for damages, restitution, and recoupment of compensation and other gains not compatible with such responsibility.

Sen. Warner: Companies taken over under bill's “resolution” authority would be “gone.” In an interview with Klein, Sen. Mark Warner (D-VA) stated:

Resolution ... will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would've been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone.