76° F
Light Rain
Light Rain

Reality Check: TV Ad Warns Of Another Bank Bailout

Published On: Feb 03 2010 06:26:46 AM CST   Updated On: Feb 04 2010 08:17:40 AM CST

Washington is trying to reform Wall Street, and the fallout means a television ad running in Madison that's warning of another big bank bailout.

WISC-TV put the ad and its claims through a "Reality Check."

The ominous ad with no voiceover seeks to scare viewers into thinking there will be another bank bailout from Congress.

"Washington still doesn't get it," the ad says.

A fast forward to the end, reveals that the ad is paid for by the "Committee for Truth in Politics." This is a one-man show, a group started by a North Carolina Republican just before the 2008 presidential campaign, WISC-TV reported.

He sued the Federal Election Commission to keep his donors secret shortly after.

With all its drama, the ad does have a nugget of truth. It goes after a bill that has passed the House called the "Wall Street Reform and Consumer Protection Act."

The Senate just referred it to committee.

The bill aims to create new financial regulations that would prevent a second collapse, even creating a process that would dismantle failing Wall Street companies.

"Now in the fine print, a 'Financial Reform Bill,' a new $4 trillion bailout for banks if they fail again," the ad says.

It's true that there is a provision in the bill that would set out parameters for another bailout should a financial crisis arise. But the misleading part is that this modifies what's been federal law since the 1930s, WISC-TV reported.

The Federal Reserve had authority to bail out AIG and Bear Stearns last year with unlimited funds.

This bill creates a Financial Stability Council, which would decide if "a liquidity event exists that could destabilize the financial system."

If so, the council can authorize the Federal Reserve to distribute funds to stabilize the market -- up to $4 trillion.

The bill outlines rules as well.

The council can't do it unless there is a 99 percent likelihood that the money will be paid back with interest, and the council can't give it to just one financial institution -- it has to be spread broadly.

Congress is allowed to vote on a disapproval of these funds, but its resolution is nonbinding.

"$4 trillion, fat cat lobbyists, special interests, lining their pockets at our expense," the ad says.

To be clear, this bill also does create a tax on financial institutions, where the money would go into a fund that would help dismantle those that fail.

The Senate Banking Committee is yet to have a hearing on this bill.

  • Edward Nero1

    Chip Somodevilla/Getty Images

    Officers charged in Freddie Gray case

    Baltimore Police Officer Edward Nero was found not guilty of all charges Monday, May 23, in connection with the death of Freddie Gray, Judge Barry Williams ruled after a bench trial. Nero is one of six officers tried in connection in the case and the second to be tried. Here is a closer look at the cases of six officers charged in Gray's death.

  • PHOTOS: Birds, birds, birds!

    Birdwatchers spotted a variety of the feathered critters on a hike in Lake Mills Saturday morning. Ed Hahn, education co-chair for the Wisconsin Society for Ornithology said some were common backyard birds and others were rare sights.

  • Mark Schilling

    PHOTOS: Badger Honor Flight brings 2,000th veteran to D.C.

    A plane headed from Wisconsin to Washington, D.C., Saturday had aboard its 2,000th veteran to visit the national memorial sites in the nation's capital.

    • The Badger Honor Flight is part of a national network that works to bring WWII and terminally ill veterans from any war to see the memorials that were erected in their honor.
    • Visit for more information.