Will Financial Regulatory Reform Be a Break With Legislative Trench Warfare?
Based on the stimulus fight, the budget fight, the climate fight, and the health care right a pretty clear pattern of legislative activity in the 111th Congress has shaped up. First you get an Obama administration proposal. Second, most liberals think it doesn’t really go far enough substantively but politically it’ll be hard to pass. Then uniform Republican opposition emerges. Then you need to deal with a bloc of 40-60 House Democrats and a dozen or so Senate Democrats who demand substantial watering down. Then you get into a kind of trench warfare and if anything passes it does so by the skin of its teeth on highly partisan votes.
Ezra Klein said yesterday morning that he thought financial regulatory reform might be different:
Unlike health-care reform, where Republicans really don’t want a bill and will happily reject all manner of bids, there is reason to believe that both sides want some new financial rules in place. Republicans weren’t any happier than Democrats when the banks held them hostage last year. Joining with the banks to kill financial regulatory reform doesn’t look like a popular move.
He elaborated in the afternoon:
The politics of this, in fact, look to be the reverse of the politics of health-care reform. There, Democrats were fairly united with industry actors, but aggressively opposed by the conservative base, and Republicans ended up siding with their base and their electoral prospects rather than with the pharmaceutical industry. The Republican attack has been populist in nature. On this, you could see the liberal and conservative bases largely agreeing, while industry actors join in opposition. The battle lines might cut the establishment (the Federal Reserve, the banks, etc.) from the grass roots more than they separate the two parties. As my colleague Binya Appelbaum reminds me, “populism” referred to a skepticism of elites setting monetary policy long before it became shorthand for a difference between the left and the right.
Maybe. But I kind of doubt it. Mitch McConnell’s intial response to the Dodd plan seems like a very typical root-and-branch rejection. And the reality is that Tea Party populism is uninformed and completely incoherent. Tea Parties claim to believe they wish the government hadn’t rescued the banking system last fall, but I haven’t seen a single sign at a rally or a single quote from a rallier to suggest support for enhanced regulation. Glenn Beck isn’t calling for enhanced regulation. The Koch family isn’t going to start busing people to pro-regulation rallies.
24 Responses to “Will Financial Regulatory Reform Be a Break With Legislative Trench Warfare?”
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November 12th, 2009 at 9:30 am
I think the Republicans will at least adopt a pose of obstruction. Even if they want a bill, they will oppose it. They will drum up the loonies and try to use them to force the Democrats into an unnecessary compromise. They will hold the regulations hostage and try to alter where the money to enforce them comes from. Any fees on investment organizations to pay for regulation or the equivalent of an FDIC-like organization will be declared to be a death sentence on investment in America. The Republicans will use their teabaggers to try to push the costs onto the general public. It will be interesting to see if the teabaggers will catch on to it.
November 12th, 2009 at 9:41 am
As a Republican that agreed with most of the “bail outs,” I’d also like to see some more regulation. But in addition to regulation of the private sector, I’d like to see some regulation of Fannie and Freddie to eventually phase them out. Moreover, as much as Republicans might be shying away from specific regulations, I don’t see a lot of democrats talking about what regulations we ought to sunset.
Let’s not pretend that both sides don’t have some culpability here. More importantly, given the incredibly stupid suggestions of Sen. Dodd (who is in no position whatsoever to push regulations of the private sector given his sweatheart deals) it would also be nice if we’d dismiss some of these terrible ideas…like turning more regulating authority over to bureaucrats that don’t know their ass from their elbow when it comes to financial markets.
Regulation is going to have to be a coming together between the public and private sectors. A political solution? Yeah, politics has really been the saviour in all of this. Anyone happen to take a look at Freddie and Fannie’s balance sheet lately? They’re still running a loss on all of the mortgages that they handed out thanks to our brilliant politicians. 100 billion dollars and counting.
November 12th, 2009 at 9:48 am
I predict we’ll see Tea Party rallies with people holding signs saying, “Keep the Government out of my T-bill auctions!!!”
November 12th, 2009 at 9:49 am
Then you get into a kind of trench warfare and if anything passes it does so by the skin of its teeth on highly partisan votes.
And then the bill is a “partisan bill” passed against “bipartisan opposition” and “even the liberal media thinks the Democrats have gone too far” and the GOP is able to simultaneously attack Dems for doing nothing and being too partisan and radical.
Seriously, when a pattern like this repeats it’s like Charlie Brown trying to kick that football. The Dems. need to sit down and figure out where things are breaking down and stop repeating the same pattern.
The American people by and large are a pragmatic bunch who don’t care about ideology. They’ll elect complete DFHs if said DFHs actually get bills passed that help many Americans. Then they’ll elect right-wing-loons who send troops here and there because “they are doing something to fight terrorism”.
The way things are working, the Dems simply aren’t getting good bills passed but rather are passing “compromises” that please no-one. If the GOP gets its act together (a big if considering how the loons have taken over the GOP), they can win big in 2010. Not because the American people are moderates who are tired of “Obama’s radical agenda” but because the American people are tired of the Dems not being able to accomplish anything without so much “politics” being involved, so they’ll vote for a “change”.
We’re liberals. Change should be our brand. Nu? Why aren’t we actually able to change things for the better now that we have all levers of power? What does that say about how effective we are at governance? Given that our brand is “we believe government can do good”, what does it say about our main selling point when we can’t even govern good?
November 12th, 2009 at 9:55 am
The goldbugs and those who hate the Fed with the fire of a thousand suns are such a marginalized constituency in the greater GOP, I can’t see them playing much of a role here. Granted, I suppose they make up a larger part of the Tea Partiers, but I suspect that the “EVERYTHING Obama does is communo-fascist-socialism!” will win out… handily.
November 12th, 2009 at 9:57 am
It is woefully naive to think that this bill will not be knee-jerk obstructed by the Tea Party right. First, they’ll brand it as “a government takeover of the entire economy.” Then they’ll start throwing around some death-panel-like canards about imagined provisions is the bill. “Under this bill, the government can tell you how much money you are allowed to keep in your savings account, and you can go to jail for saving too much money!” That sort of thing.
The Tea Party right is indeed uninformed and incoherent — and that’s being charitable. There’s no reason to think financial regulatory form will be treated any differently than anything else.
November 12th, 2009 at 10:01 am
I don’t really think anyone is actually suggesting that we form an alliance with their cynical leadership. I think the idea is that we try to win support from their core constituents. Many of them are a lot more pissed because of the unemployment rate than they are because Obama is black or they hate Democrats.
Look, so far Democrats may well be doing the best they can do. There’s a huge gulf between “the best they can do” and “what we need”. If you want to know why people hate the government, that’s pretty much the reason. The government doesn’t do what it needs to do. It does, however, do things like steal people’s land to build strip-malls and issue endless fees for even the most minor of government interactions. Most people don’t see a difference between the local government and the federal government, all government is government and their personal interactions with that government are often very unpleasant. Liberals often overlook that fact, and only see the ability of government ot help people. They don’t see the ability of government to take peoples children away on a whim, charge 100 dollar dog licensing fees so they don’t have to raise taxes on the wealthy, and steal their land to build to strip-malls or raillways.
If you can’t understand that, then you’ll never understand why so many people who need the governments help don’t trust the government To help. 9 times out of 10, what’s wrong with Kansas is a corrupt local government, a distant and corrupt state legislature, and a federal government that doesn’t care enough to do anything about it.
November 12th, 2009 at 10:11 am
First you get an Obama administration proposal. Second, most liberals think it doesn’t really go far enough substantively
Well yeah, there’s that. With Summers as the real president on anything related to economics, there is little reason to think Obama will push for real reform and solve the ‘too big to fail’ problem, or prevent banksters from making bets with taxpayer money.
Typically Democrats will suggest some Goldman Sachs-friendly BS reform, then teabaggers will scream ‘Communist!’.
November 12th, 2009 at 10:26 am
Bear in mind that there’s ample evidence that the body of Tea Baggers consists primarily of Paultards. Not only do they despise financial regulation, but anything at all will be called a “giveaway to the Federal Reserve,” including Dodd’s proposal to strip the Fed of much of its power.
Also, the GOP will never in a million years support any kind of finance reform. Failure to pass health care reform doesn’t make the Dems look bad, it just makes them not look good. Failure to pass regulatory reform “when everybody knows we need it” will make them look bad.
Since the strategy of “do everything to destroy the country such that the Dems look bad” has worked pretty well for the GOP so far, I’m sure they’ll continue it.
November 12th, 2009 at 10:43 am
Are we still arguing over whether we can get Republican “populist” support for Democratic “populist” initiatives?
Teabaggers don’t think. They do what they’re told. and they’re told to hate Obama and anything proposed by him or his fellow Democrats. It doesn’t matter why.
These people need to be marginalized and eventually destroyed. They should not be factored into any serious thinking about how best to solve the country’s problems. Focus on the Bayhs and the Nelsons because you must, but don’t waste time figuring out how to get sheep programmed to reflexively reject every suggestion you make to agree with you.
November 12th, 2009 at 10:45 am
The vast majority of Republicans in the Senate, and all but a handful in the House, will vote against any Obama Administration financial reform bill sight unseen. This is who they are. This is what they do.
The most likely scenario is that half a dozen Senate Republicans will play ball on this particular issue because they want to polish their tarnished image as responsible legislators. And they will therefore band together with half-a-dozen conservative Democrats to make sure that the regulatory oversight is as minimal and ineffective as possible, while still getting their names on a financial reform bill and making David Broder moan in bipartisan ecstasy.
November 12th, 2009 at 10:57 am
Democratic leaders have no real interest in financial reform. They want to see more crazy financial shenanigans to prop up asset prices, not less. They want more lending implicitly backed by the U.S. treasury, not less. So change isn’t going to happen.
November 12th, 2009 at 11:35 am
They’re Republicans. We should believe their statements about being really, really mad at the banks about as much as John McCain’s statement that would suspend his campaign and skip the debate.
Anything they say is merely intended to capture that day’s news cycle, and they’ll toss whatever message they’ve been adopting overboard in a heartbeat.
We might as well interpret their yammering about Obama’s terrible, terrible Medicare cuts as a genuine statement of belief and intention for future policy.
November 12th, 2009 at 11:44 am
The Tea Party-types are basically nihilists in their view of government. The idea that they would support any initiative that gives the government the power to do anything is ridiculous.
November 12th, 2009 at 11:48 am
joe from lowell is absolutely right. Ezra Klein demonstrates a lot more naivety than I expected from him on this one. The Republican ‘base’ is indistinguishable from astro-turf at this point. Those idiots take their talking points directly from Fox News, so don’t expect any legitimately populist viewpoints to be expressed.
And that’s before you even get to the matter that if it’s a fight between elites and the bases of both parties, the elites still win. At this point, it’s simple economics. Until we ban corporate campaign contributions or (even better) publicly fund campaigns, the democratic legitimacy of our state is in serious doubt.
November 12th, 2009 at 12:04 pm
If we don’t change capital requirements for lenders and insurers, nothing will change and within 15 years we’ll have re-run of last fall.
Capital requirements that prevent 33-1 margins is a no-brainer.
But that doesn’t mean anything will happen.
November 12th, 2009 at 12:13 pm
No point worrying about this until President Snowe makes her
position known
November 12th, 2009 at 12:44 pm
I agree 100% with soullite on this. If Democratic politicians (as well as a significant fraction of the Democratic base) understood how much people’s interactions with (often local) government affected how people feel about government and hence how likely they are to support the party of “more government”, we wouldn’t have, e.g., lost the NJ governorship in last week’s elections.
November 12th, 2009 at 2:00 pm
Perhaps we have a failure to communicate. We certainly have a failure to agree upon the use of terminology. Austrian School advocates like Ron Paul eschew economic “regulation”. However, here is an interview with Andrew Ross Sorkin by Tavis Smiley wherein Sorkin calls for higher bank capital requirements as a form of “regulation”.
At the same time, Ron Paul, in Chapter Two of “End the Fed”, claims that fractional reserve banking is inherently fraudulent, suggesting that when a bank holds anything less than 100% of its deposits, it is acting fraudulently.
Somehow, Sorkin’s view becomes identified as “pro-regulation” while Paul’s much more restrictive proposal is deemed “laissez faire”.
In case you didn’t know, neither Hannity nor Limbaugh nor O’Reilly ever describe or even mention the substance of the anti-Fed Austrian point of view. Because no one in the establishment ever does. At the same time, the Neo-con masses claim they are concerned about runaway spending and deficits but still insist on bigger defense budgets and more war. Conflating Ron Paul and the Neo-cons is nonsense.
For further explanation, here’s a short 936 page pamphlet on the topic.
BTW, I love how you compassionate “progressives” mock special-needs people when debating your political opponents.
November 12th, 2009 at 2:26 pm
Better a dancing queen than an intellectual eunuch.
November 12th, 2009 at 3:56 pm
Ten year anniversary of Gramm-Leach-Bliley’s signing. Chris Dodd voted YES. For a trip down memory lane:
http://peureport.blogspot.com/2009/11/gramm-leach-bliley-blows-out-ten.html
November 12th, 2009 at 5:25 pm
BTW, I love how you compassionate “progressives” mock special-needs people when debating your political opponents.
Is it irony when people employ logical fallacies when discussing logical fallacies, or is hypocrisy just to be expected in political “debate” at this point?
November 13th, 2009 at 7:50 am
I’m told that Mark Williams, Tea Party Express leader, was on Fox News this morning and referred to House Financial Services Committee chairman Barney Frank as “the dancing queen.”
Fats Limbaugh plays a spoof song based on “Dancing Queen” that refers to Franks this way.
November 13th, 2009 at 3:26 pm
Bob has a good point. You can’t call for full reserve & then balk at increasing reserve requirements, because the increase takes you closer to your stated goal anyway.
I’m personally anti-Fed, though I’m not a Goldbug. To me, goldbuggery is more a signal of how bad the system has gotten than a serious solution in itself. I’m leaning more towards the idea every day that somehow the form of institution we know as a “bank” itself needs to be replaced entirely, as they can’t function without screwing us all.