By Shailagh Murray
Washington Post Staff Writer
Monday, May 17, 2010; A03
It was the chant heard around the Senate: Angry GOP delegates in Utah calling out "TARP! TARP! TARP!" as they tossed Sen. Robert F. Bennett from the primary ballot, punishment for the veteran lawmaker's 2008 vote to bail out the financial sector.
Now, as the Senate works through a massive regulatory overhaul bill, some lawmakers are using the legislation as an opportunity to redeem themselves in the eyes of an angry electorate -- a second chance to get on the right side of the Wall Street vs. Main Street argument.
The legislation aims to prevent another Wall Street meltdown by imposing tough new regulations on banks and financial firms. It's also an opportunity for nervous incumbents to assail the $700 billion Troubled Assets Relief Program, which has turned into a touchstone of the anti-Washington sentiment threatening lawmakers in both parties.
Of the 74 senators who voted for TARP, 17 are seeking reelection this year. Sen. Blanche Lincoln (D-Ark.), dubbed "Bailout Blanche" by her opponent in a Democratic primary Tuesday, is pressing for the toughest approach. "If we do not act boldly in the face of the near-collapse of our economy, tragic Wall Street abuses and abysmal regulatory failures, we will all suffer the consequences," Lincoln said last week on the Senate floor.
Sen. Charles E. Grassley (R-Iowa), a "yes" on TARP who is showing signs of vulnerability back home for the first time in his career, has emerged as one of the few Republicans to support Lincoln's strict rules for derivatives trading. The White House and senior Senate Democrats hope to dilute the language, but Lincoln's proposal will remain at least until Tuesday' primary.
At least a few GOP senators are expected to support the legislation in a final vote, which could come as soon as this week. Polls make it clear that the public wants Congress to crack down on risky investment practices, but Republicans also think that expanding the power of the federal government is a toxic proposal for many conservative voters, even in an attempt to forestall market calamities and taxpayer bailouts.
While much of the TARP funding has been returned to the government, "I'm not sure people know that," Grassley said. Rather, he said, Republican and independent voters at his town hall meetings view the program as another federal action that has yielded little benefit to average Americans while adding to a crippling national debt.
"And so, TARP and stimulus, health care, the budget of last year and to some extent cap and trade -- it's all adding up to people saying to me, 'I'm scared,' " Grassley said.
The five-term Iowa senator hasn't faced a serious challenge since he was first elected in 1980. This year could be a different story, as polls show a shrinking margin over likely Democratic challenger Roxanne Conlin.
Like Grassley, Lincoln was being assailed on the campaign trail for her TARP vote and for accepting campaign contributions from banks that had received bailout funds. Her opponent in the primary, Lt. Gov. Bill Halter, aired a TV ad describing TARP as a conspiracy between "Washington and Wall Street" to line "their pockets with insider deals and stick Arkansas families with the bill."
Lincoln's proposal included a provision that could require banks to spin off their lucrative derivatives trading units. Former Federal Reserve chairman Paul A. Volcker and current FDIC Chairman Sheila C. Bair are among the advocates of the broader overhaul efforts who have criticized Lincoln's push as too restrictive and are advocating changes to the final bill.
But it's sending a clear message back home. Two weeks after Lincoln unveiled the measure, her campaign rolled out a new radio ad featuring President Obama praising her for "leading the fight to hold Wall Street accountable and make sure that Arkansas taxpayers are never again asked to bail out Wall Street bankers."
Another active participant in the regulatory debate is Sen. Kay Bailey Hutchison (R-Tex.), whose TARP vote helped to secure her decisive loss to Gov. Rick Perry in the GOP gubernatorial primary in March. Perry described Hutchison, the early favorite in the race, as "Kay Bailout," and hammered TARP to portray her as out of touch with Texas conservatives.
"We all have a goal of good reform that eliminates some of the things that happened a couple years ago that American taxpayers are paying dearly for right now," Hutchison said as she unveiled one of her amendments. "We don't want bailouts."
Sen. John McCain (R-Ariz.), seeking a fifth term, briefly suspended his presidential campaign in September 2008 to return to Washington to work on the economic crisis. The result was TARP, approved 74 to 25 by the Senate, with McCain's support.
"Obviously, that didn't happen," McCain told the Arizona Republic editorial board in February. "They decided to stabilize the Wall Street institutions, bail out AIG, bail out Chrysler, bail out General Motors."
Former congressman J.D. Hayworth, McCain's challenger in the GOP primary, shot back on MSNBC, "This instant revisionist history, saying you oppose something now that you actually voted for, that sounds a whole lot more like John Kerry in 2004 than the John McCain I used to work with."
In a Senate speech, McCain urged his colleagues to expand the bill's scope to tackle Fannie Mae and Freddie Mac. "If we are going to perform our duties, albeit too late -- too late because of the terrible losses we have inflicted on taxpayers," he said.