Is the Resolution Fund the Public Option of Financial Reform?

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A flashpoint in a partisan legislative battle. Check. Check.

A favorite GOP talking point used to reduce a massive piece of legislation into two, scary-sounding words. (“permanent bailout” and “government takeover”) Check. Check.

Relatively insignificant in the grand scheme of reform. Check. Check.

The public option was far from a “government takeover.” Only 3 or 4 million people were expected to enroll under one Senate version. Still, it was stripped from health reform legislation after it became political kryptonite.

The resolution fund called for in the proposed Senate bill would be $50 billion – hardly enough money to “bail out” any Wall Street firm. Plus, as Adam explained this morning:

Whether or not the financial sector pays to unwind big firms is not at stake. It’s when they pay that’s the issue. The fund would offer some upfront money to dissolve a “too big to fail” institution. Treasury would loan the FDIC money to cover additional costs and then the government levies a fee on the financial sector to recoup whatever they didn’t make back from liquidating assets. It’s either partially pre-funded or totally post-funded by big banks.

It seems like Republicans such as House Minority Leader John Boehner, insisting the resolution fund is “a bailout slush fund,” are gunning for a political victory similar to the one they nearly notched on health care. But will the resolution fund go the way of the public option? Some key Democrats appear willing to let the resolution fund go in hopes of paving the way for bipartisan support. This too seems familiar.