SteveG’s post, Sen. Dodd Accuses Republican Leader of Lying About His Bill, points to a McClatchy article which in turn refers to a memo by Republican strategist and wordsmith Frank Luntz on how to defeat financial regulatory reform. Luntz is in the news because Republican Senate Minority Leader Mitch McConnell lifts phrases almost verbatim from Luntz’s “roadmap.”

Ezra Klein makes similar points in his 15 April 2010 Washington Post article, What’s the Republican Alternative to Bailouts?. Klein not only shows that Senator McConnell follows Luntz’s roadmap and also has misrepresented Senator Dodd’s bill but also goes on to say:

But there’s a good argument to be made that this bill doesn’t go far enough. On some level, so long as we have systemically important firms, there will be the risk of bailouts. Management and shareholders might not win out, but many creditors will do better than they should, and so too will some firms. Criticizing the Dodd bill for not entirely ending the problem of systemically-crucial firms — and thus rescues of some form or another — is a fair critique.

The ways to permanently end bailouts, however, are very radical: The most common suggestion is to break up large firms before they become too big to fail. Another option, put forward by Gary Gorton, is to insure the securities that banks lend to one another. Another option is to impose such enormous capital requirements on systemically important banks that they can’t take many risks and can mostly cover their debts.

If you want to read Luntz’s 17-page memo, you can find it in Sam Stein’s 1 February 2010 HuffPost article, Frank Luntz Pens Memo to Kill Financial Regulatory Reform.

-RichardH