The Best Way To Pass Financial Reform Is To Be Even Tougher On Wall Street
The Huffington Post highlights a letter going around, signed by major progressive and centrist economic thinkers like Robert Reich, Dean Baker, and across the country, which highlights loopholes in the Senate’s financial regulations bill and asks for specific changes to the legislation.
HuffPo, unfortunately, uses a pretty inflammatory headline for their article about the letter, claiming that it “slams” the reform bill before the Senate, and makes it seem as if the signatories are simply writing off Senate Banking Committee Chris Dodd’s (D-CT) legislation. The truth is, they see it in many ways a step forward, but feel that it needs to do more to rein in Wall Street.
I’ve heard from some people I know in Democratic circles that this letter is unhelpful, and that it essentially will be used by right-wing Republicans to undermine the case for a financial reform bill, and maybe even eventually lead to its defeat. I’ve been following these Republican efforts very closely — working off of Chris Bowers’ post at Open Left, I wrote a Think Progress post on Mitch McConnell’s Wall Street fundraising that basically went viral, appearing all over the blogosphere and all the way to the DNC’s listserv — and I disagree that left-wing criticism of the bill will make it less likely to pass. In fact, I think it might make the bill even easier.
First let’s review the Republican charges. Sen. Mitch McConnell (R-KY) claims that the bill will actually lead to “endless bailouts” of Wall Street, not rein it in. Obviously, if McConnell is allowed to push this line uncriticized and succesfully, it will be devastating. The public hates (for good reason) unfettered financial industry bailouts, and McConnell is smart to try to actually hit at the bill from the left.
So then why do I think it could actually improve the bill’s political support if people like Reich and Baker criticize it? It seems counterintuitive. After all, McConnell could easily point to left-wing critics and say, “See, I’m validated! Even the commies agree with me!” But there’s one difference between the economists and McConnell: The economists are sincere.
Their concerns are not only substantively valid — there are a number of major things lacking in both financial bills (House and Senate), like a permanent firewall between investment and commercial banking — but they’re the same ones the public as large has. The American people have a white-hot anger right now towards Wall Street, and what they really want to see is a government that is going to aggressively go after a financial industry that tanked the global economy with its fraud and greed. If Senate Democrats listen to the progressive economists and bend to the will of Americans who want stronger regulations, then there will be a public image created — a justified public image — that the Democrats have heard from the people, know they want an even tougher bill, and are complying.
The only way to stop people like McConnell who claim the bill is too soft or even favorable to Wall Street is to do everything we can to make sure it isn’t. Call his bluff, and make him look foolis for saying a bill that will break up big banks will actually somehow favor them. Say, “You’re right, we should be tougher, and now we are. Do you support us yet?” The more you do that, the more ridiculous McConnell will look and the more the public will rally to your side. This is an issue that tough-on-bank legislators shouldn’t be able to lose. Heck, a recent poll of tea partiers found that most of them wanted Obama to crack down on Wall Street harder.
The only way I see this strategy not working is if bank-friendly legislators ignore progressives and their concerns, who will continue to protest without making the bill any better. Public support will then collapse, and there won’t be any bill passed. But if that happens, the blame won’t lie on people like Reich or Baker but on members of Congress who have decided that what’s political favorable and what’s morally right simply isn’t as important as what their friends at JP Morgan and Goldman Sachs want. To quote Robert Reich, “Wall Street doesn’t want these three major reforms because they’d cut deeply into profits, and it’s using its formidable lobbying clout with both parties to prevent these reforms from even from surfacing. It’s time for Main Street — Tea Partiers, Coffee partiers, and beer drinkers — to be heard. ”