Bloomberg News

Republicans Want to ‘Protect’ Wall Street, Levin Says

November 16, 2011

(Updates with Levin quote on China in 19th paragraph.)

Nov. 11 (Bloomberg) -- Republican presidential candidates want to repeal Congress’s Dodd-Frank financial regulation overhaul to “protect the status quo” on Wall Street, said U.S. Senator Carl Levin of Michigan.

“They’re not willing to take on Wall Street,” Levin, a Democrat, said in an interview on “Political Capital with Al Hunt” airing on Bloomberg Television this weekend.

Republican presidential candidate Mitt Romney, the former governor of Massachusetts, has called the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted last year, a “killer” of small banks.

The other Republican hopefuls -- Texas Governor Rick Perry, former House Speaker Newt Gingrich of Georgia, businessman Herman Cain, Representative Michele Bachmann of Minnesota, Representative Ron Paul of Texas, former Pennsylvania Senator Rick Santorum and former Utah Governor Jon Huntsman -- have all called for the repeal of the law, which they describe as federal regulatory overreach.

The repeal of Dodd-Frank also has the support of U.S. Senate Republicans, including Minority Leader Mitch McConnell of Kentucky.

Republicans don’t want financial oversight “because some of them are automatically opposed to regulation, whether it’s food regulation, safety regulation or Wall Street regulation,” Levin said. “They’re, I think, proven wrong on this.”

He also said opposition by Republicans to raising revenue may scuttle deliberations by Congress’s supercommittee, which is seeking at least $1.2 trillion in cuts to reduce the deficit.

Odds Against Deal

“The odds are somewhat against them,” Levin said. Tea Party supporters who “really dominate the Republican Party now” oppose any additional revenue, he said.

“No matter how much the people might support, for instance, restoring that upper-bracket tax on folks earning more than $250,000, or $1 million in the case of maybe a surcharge on income more than $1 million, no matter how much public support there is for revenues,” the Tea Party’s “rigidity” means the “odds are against” a supercommittee deal, Levin said.

The panel must make its recommendations by Nov. 23 and Congress must approve them by Dec. 23 to avoid automatic cuts in defense and other government spending. The defense budget would automatically be cut over the next decade by $500 billion, not including interest.

Defense Cuts

Levin, chairman of the Senate Armed Services Committee, has said he wouldn’t support additional cuts in the defense budget beyond about $450 billion already planned by the Obama administration. Still, he refused to say whether he would back efforts by Senate Armed Services Republicans John McCain of Arizona and Lindsey Graham of South Carolina to exempt defense spending from automatic cuts if Congress fails to back the supercommittee recommendations.

“For me to speculate on that would mean that, if they don’t succeed, that there’s a fallback position, and the trouble with outlining a fallback position now means it’s taking the heat off them to succeed,” Levin said. “We’ve got to keep the leverage on there, that pressure on there. The whole purpose of that threatened sword of Damocles is so that it isn’t used.”

Levin said he disagrees with across-the-board cuts in defense. Instead, he said, the priority should include reducing money for modernizing and maintaining nuclear weapons and on keeping troops based in Europe.

Nuclear Weapons

“The amount of money we’re spending on maintaining nuclear weapons, modernizing nuclear weapons, is not in keeping with the modern world,” Levin said. “It’s much more a Cold War remnant.”

The U.S. military maintains an arsenal of 1,790 deployed strategic nuclear warheads, according to the September 2011 accounting under the New START nuclear arms treaty.

President Barack Obama last year promised Senate Republicans increased nuclear modernization spending to win their support for ratification of the New Strategic Arms Reduction Treaty with Russia. Obama pledged more than $85 billion over a decade to modernize the U.S. nuclear weapons complex.

Levin also said he would cut back on U.S. forces based overseas, particularly in Europe. The U.S. has 81,284 troops in Europe, with more than half in Germany, according to the Defense Department.

Levin’s defense panel on Nov. 8 reported that its staff investigation turned up suspected counterfeit parts being used in U.S. defense equipment, compromising reliability.

Parts ‘Painted Over’

“These are almost all coming from China,” Levin said. “These are parts that are ripped off, used, waste, computers, washed in dirty rivers, dried out in the street, and then painted over” to make them “look like new,” he said.

He said he will seek to include in defense authorization legislation a provision requiring that electronic parts be purchased only from certified suppliers or that contractors have to inspect each part at the border.

“Third, hold the contractor who is supplying the item that has the counterfeit parts accountable to replace them at their cost,” he said. “Right now, whether or not the taxpayer is getting socked for replacing counterfeit parts or the contractor gets socked depends on the kind of contract it is. We’ve got to end that.”

‘Private Loss’

Levin, who is also chairman of the Homeland Security and Government Affairs panel’s Permanent Subcommittee on Investigations, said he won’t call for former New Jersey Senator Jon Corzine to testify before Congress on the collapse of his brokerage, MF Global Inc.

“In that case, the taxpayers were not hit,” Levin said. “This is a private loss.” Lawmakers crafted the Dodd-Frank legislation to protect against bank actions that could jeopardize the “entire economy.”

“We had to restore regulation to Wall Street,” Levin said. “It was the deregulation of Wall Street which allowed them to do so many bad things.”

Levin criticized Romney’s opposition of the government’s involvement that saved tens of thousands of jobs at Chrysler Group LLC and General Motors Co. “We would not have an auto industry, at least with two of our three companies, if Mitt Romney had had his way,” Levin said.

In late 2008, faced with estimates that as many as 3 million jobs could be at risk, President George W. Bush’s administration extended more than $17 billion in loans from the Troubled Asset Relief Program to GM and Chrysler. The third auto company, Dearborn, Michigan-based Ford Motor Co., didn’t need government financing thanks to a 2006 refinancing of its debt.

Romney has been “proven wrong, because that action on our part and the president’s part saved two of the three big auto companies,” Levin said. “By the way, they’ve paid back the amount of money that was lent to them, so the government hasn’t lost.”

The industry is “now coming back strong, and it’s coming back strong because we took action, as every other country did, by the way, that had an auto industry,” Levin said.

--With assistance from Lisa Lerer, David J. Lynch and Viola Gienger in Washington. Editor: Terry Atlas, Jim Rubin.

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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