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FACT CHECK: An echo is heard in Wall Street debate
WASHINGTON – Republicans say White House-backed legislation to oversee the financial industry would lead to more government bailouts. Democrats say that won't happen. So who's right?
No one can be sure. But in this case, some key Republican arguments are supported by many on the left, right and center.
The GOP's position was once raised by none other than Obama's own treasury secretary, Timothy Geithner, and by some liberal critics of the Democrats' proposed overhaul of Wall Street oversight — as well as by nonpartisan analysts.
Central to the criticism spearheaded by Senate Republican leader Mitch McConnell is a proposed $50 billion fund that big banks would finance and that the Federal Deposit Insurance Corp. would use to liquidate giant, interconnected financial firms on the verge of collapse.
McConnell, R-Ky., said the very existence of the fund "would of course immediately signal to everyone that the government is ready to bail out large banks."
In October, Geithner made a similar argument to House lawmakers, saying that instead of creating a fund in advance, the costs of liquidating a large firm should be assessed to other large financial institutions after the FDIC dismantles a company. "A standing fund would create expectations that the government would step in to protect shareholders and creditors from losses," he said then.