The Bailout And The Innocent Bystander Fable

In my book, The Uprising [1], and in a series of blog posts [2] and YouTube videos [3], I explored the Innocent Bystander Fable—the myth forwarded by congressional Democrats claiming that, despite being in the majority, they have absolutely no power to stop anything the federal government is doing. This fable was the reason most cited for congressional Democratic inaction on the Iraq War. Democrats told us they had no power to stop or even slow down the war, even though they had the legislative and filibuster power to stop funding the war.

Now, the Innocent Bystander Fable is making its debut on the issue of the Wall Street bailout. The Bush administration is handing over taxpayer cash to banks, and banks are subsequently refusing to lend more money - instead either using the money to pay out executive bonuses or to buy up smaller banks. That's utterly outrageous, yet in this Wall Street Journal [4] story, we see Democrats already claiming they can do nothing about it:

House and Senate leadership aides say it would be difficult to pass any controversial legislation [reforming the bailout], citing the difficulty lawmakers had in passing the financial-rescue package in the first place, as well as the limited Democratic majority in the Senate. "There's not much we can do other than jawbone," Sen. Charles Schumer, D-N.Y., said in an interview earlier this week.

Read that again: Despite controlling Congress and therefore having the ability to amend or even repeal the bailout bill, Schumer expects the public to believe "there's not much we can do other than jawbone." Indeed - Chuck Schumer thinks Americans are stupid.

The good news on the bailout bill is that some other senior Democrats seem to be countering Schumer:

Senate Banking Committee Chairman Christopher Dodd (D-Conn.) offered a number of specific steps he is considering, including crafting a federal statute based on a New York state law that would allow the government to reclaim money from firms that accept federal funds but don't fulfill their commitments.

Current law would only allow the government, as a creditor, to take such a step if a company enters bankruptcy. Mr. Dodd said he wants to expand the government's right to address his concerns that companies may be using government funds to pay executives.

"We've got to make sure we deal with this," Mr. Dodd said, adding that he's tried lecturing firms "and it's not working."

Dodd's rhetoric stands in stark contrast to Democrats' near total unity in promoting the Innocent Bystander Fable on the Iraq War—and that's a good thing if it turns into substantive Banking Committee action. Additionally, because the bailout bill was so undemocratically structured to give czar-ish power to the Treasury Secretary, the next Treasury Secretary will have almost complete authority to reform the bailout him/herself. So there's a chance this bailout can be changed before it fully gives away 5 percent of our entire economy to Wall Street fat cats.

But make no mistake about it —Schumer is debuting the Innocent Bystander Fable on the issue of the bailout. And if Democrats retain control of Congress, we can expect that meme to become more prevalent. Caught between their financial industry donors and a public that hates the bailout, Democratic leaders will trot out this Trojan horse to explain away their corruption—claiming it isn't deliberate, but merely a product of their supposed powerlessness.

They aren't powerless, of course—they were the ones who originally provided the votes to pass the bailout. And if they had the votes to pass it—they sure as hell have the votes to amend it or repeal it.