For many in Congress, it’s not the economy

At this hour, an utterly amazing exchange is taking place on Capitol Hill on an issue that is clearly the most important and fundamental issue facing the nation.

It’s a brutally honest discussion between Tim Geithner, the Secretary of the Treasury, and the few members of the House Financial Services Committee who showed up for work today.

Geithner is, basically, calling out Congress for its inaction on closing loopholes that led to financial meltdown in the first place

It’s a rare honest debate in which both sides are speaking frankly.

For example, Geithner was incredulous when one member of the committee suggested the “too-big-to-fail” banks should not be subject to the same regulation that smaller, community banks are.

“The important thing to recognize is — and it’s just worth going back to what it was like last fall — without the ability for the government to step in and manage the failure of a large firm, to contain the risk of the fire spreading, we will be consigned to repeat the experience of last fall. It’s a stark, simple thing. And there is no… I know of no person who has stood in my seat — this is true of (Fed) Chairman Paulson — in any central bank in any major country that would say the country should be run with no authority to step in and act in that case.”

“They are getting into the fundamental issue of regulatory reform and that is the issue of pre-emption by the authority; do they have the right to go in and tell a bank they can’t do a certain business, what is the right to take over a certain company if there’s deemed to be a systemic risk?” a CNBC analyst noted. “This whole concept of prevention has been out there for, really, decades, that Congress has decided not to do because of these issues that have just been brought up.”

Is that an important discussion — the fundamental philosophical on the role of government — for the people who were elected to Congress to hear? Not for many of them.

I count at least seven empty chairs. Even the committee chair, Rep. Barney Frank, left after his opening statement, in which he defended Congress by saying the committee has passed legislation that further regulates the banking industry. In fact, however, that legislation has not become law.

Three Minnesotans — Rep. Michele Bachmann, Rep. Keith Ellison, and Rep. Erik Paulsen — sit on the committee.