Why Bailouts are Bad 101: GOP Senator Edition

Last week, several Republican Senators rightly submitted amendments to prevent the federal government from bailing out Detroit. Reuters has the story:

They have proposed at least three “No Bailout” amendments to spending bills that the Senate is currently considering, all of which would limit the U.S. government’s ability to help cities in fiscal crisis.

Even though the amendments will likely fail in the Democrat-dominated chamber, cities and counties are alarmed by legislation they say could jeopardize funding for hundreds of local governments and are pushing back.

The five Senators highlighted by Reuters are Orrin Hatch (R-UT), John Cornyn (R-TX), Ron Johnson (R-WI), David Vitter (R-LA), and Lindsay Graham (R-SC). Good for these Senators for standing on principle.

Or not. A quick Google search brings up the fact that Senators Graham, Hatch, and Cornyn voted for TARP in 2008, which bailed out the big banks. (Senator Hatch has since apologized for doing so, at CPAC 2011.) Senator Vitter opposed TARP, though he has used taxpayer dollars inappropriately in a different way, when he was infamously busted for solicitation while using a taxpayer-paid phone.

Senator Johnson was not in the Senate in 2008, but spoke out against TARP even before running for office in 2010.

So why are these Senators suddenly against bailouts for Detroit, which has 700,000 residents suffering from their city’s poor management? Why did wealthy bankers deserve taxpayer money? Tea Party Patriots reached out to Senators Hatch, Cornyn, and Graham for answers. None of their offices responded to multiple requests for comment.

Alas, the hypocrisy of Senators Cornyn, Graham, and Hatch is all too common in Washington. Banker buddies get money; citizens outside favored interests do not. But the standard these three Senators helped create – Too Big to Fail–sets up moral hazard for the foreseeable future, and is yet one more reason why TARP never should have happened in the first place.