Liberal pundit Michael Kinsley once defined a political gaffe as an instance of a politician accidentally telling the truth. House Financial Services Committee Chairman Barney Frank, D-Mass., recently made a gaffe that fits Kinsley’s definition to a tee.

by John Berlau at Big Government.com

In a debate with Ralph Nader on MSNBC’s “The Ed Show,” in which Nader was accusing Frank of being too timid on the financial regulation bill then moving through the House, Frank responded, “We are trying in every front to increase the role of government in the regulatory area.”  Conservative blogs took note of Frank’s use of the word “every front”, as did Rep. Paul Ryan (R-Wis.), and earned a brusque “tsk- tsk” from The New Republic’s Jonathan Chait.

This is an example of “the conservative misinformation feedback loop in action,” Chait exclaimed. Frank was only talking about banking, Chait claimed, and “not confessing to a plan to expand government in every area.”

Actually, in prefacing his comments, Frank moved the topic from Nader’s point about derivatives to the broader issue of how “the right wing took control of government and ruined it” and how it is supposedly benefitting from its “own incompetence.”  But if one still doesn’t want to take this as Frank’s confession of wanting to increase government intervention “in every front,” one need look no further than the bill by Frank that passed the House in December and Chris Dodd’s Senate “financial reform” bill that Democrats are trying to ram through the Senate.

In the debate, Democrats never tire of accusing Republicans of siding with “Wall Street banks.”  But last week Republicans made headway when Senate Minority Leader Mitch McConnell pointed out that the bill $50 billion resolution fund would institutionalize bailouts for big banks, whether these banks failed themselves or acted as creditors to too-big-to-fail institutions.  Even an editorial in the Washington Post stated that “Mr. McConnell is partly right” and that “creditors might fund systemically important firms on artificially advantageous terms, thus enabling them to grow bigger and riskier.”

But the same editorial wrongly asserted, as many have, that “Wall Street would provide the $50 billion fund” entirely. Putting aside the fact that taxes on any firms are always passed on to some extent throughout the economy, the fees for this fund would come from the broad category of “financial institutions” defined by the Dodd bill.

I previously wrote in BigGovernment.com that this category will likely include home and auto insurers, such as Geico, Allstate and State Farm — relatively stable firms that had virtually nothing to do with risky bets that led to the financial crisis. But now, experts looking at the bill’s language see that the bill’s specific coverage of “nonbank financial companies” could mean taxation, regulation, and even possible nationalization for a wide variety of Main Street businesses, who would suddenly find themselves under the direct supervision of the Federal Reserve Board, the bill’s designated regulator for “systemic risk.”

“The legislation … gives the Federal Reserve power to regulate any large company in America.,” writes Gregory Zerzan, former Deputy Assistant Treasury Secretary in the Bush administration, in the Wall Street Journal. “The current proposals for “financial” reform are stalking horses allowing government intervention into virtually every facet of the U.S. economy.”

The 1,336-page Dodd bill — called the “Restoring American Financial Stability Act” — defines “nonbank financial company” as any business that is “substantially engaged in activities in the United States that are financial in nature.” Note that there is no requirement that these firms actually be affiliated with a depository bank or a broker-dealer.

FULL STORY

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