Senate Minority Leader Mitch McConnell has said that the financial regulation reform bill would institutionalize bank bailouts. The New York Times' Paul Krugman slammed the top-ranking Senate Republican's rhetoric Sunday, saying it was "possibly the most dishonest argument ever made in the history of politics."

On Fox News Sunday, McConnell threatened that a Republican filibuster is on the horizon this week because of what he called "the partisan bill." He insisted that Democrats are unwilling to work with Republicans on reforms of Wall Street.

"The fifty billion dollar bailout fund needs to come out," insisted McConnell. "We need to have a system in there under which the creditors can expect that they're going to be treated fairly somewhat similar to the bankruptcy laws and we need to have enhanced capital requirements. None of that is currently in the bill that the Majority Leader would try to have us take up on Monday, which came out of committee on a strictly party-line vote."

Pointing to McConnell's distortions of what Democrats intend to do with their bill, Krugman tore apart McConnell's political positioning on ABC Sunday morning.

"Anyone who says we need to be bipartisan should bear in mind that for the last several weeks, Mitch McConnell has been trying to stop reform with possibly the most dishonest argument ever made in the history of politics, which is the claim that having regulation of the banks is actually bailing out the banks," Krugman asserted. "Basically the argument boiled down to saying that what we really need to do to deal with fires is abolish the fire department, because then people will know that they can't let their building burn."

Krugman warned of the misinformed electorate in a blog post Wednesday, adding "and it’s a lack of understanding that the likes of Mitch McConnell are happy to exploit."

"What we are getting in this bill is a way to have graceful failure of big institutions," Krugman, a Princeton economist and columnist, explained. "We know how to deal with small banks... but we don't have a way of dealing with complex, shadow institutions like Lehman or Citigroup and this bill would give you that. It doesn't deal with 'too big' but it may deal with the failed banks."

This video is from ABC's This Week, broadcast April 25, 2010.

Watch this video on iPhone/iPad