Robert Kuttner: Financial Reform at a Crossroads

Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

Posted: April 23, 2010 11:04 AM

Financial Reform at a Crossroads

The financial reform bill now pending in the Senate could be a huge win-- for both restraining the excesses of Wall Street and for Democratic progressives -- or Senator Chris Dodd could snatch defeat out of the jaws of victory. The risk is a replay of the endgame of the healthcare battle, but in reverse: instead of Democrats hanging together and passing a bill with the president belatedly leading, we could see a hollow bipartisanship and a feeble bill.

On Thursday, there was an uncharacteristically fractious meeting of the Senate Democratic Caucus. On one side, leading progressives such as Maria Cantwell, Ted Kauffman, Dick Durbin, Byron Dorgan, and Jeff Merkley, argued that this was a moment to put forward floor amendments that would both strengthen the bill and force Republicans to take difficult votes either backing reforms or identifying themselves with Wall Street.

But the Banking Committee Chairman, Chris Dodd, was more inclined to try and strike deal over the weekend with his Republican counterpart, Richard Shelby, for a bipartisan bill. The price of this would be weaker provisions on derivatives, consumer protection, and on resolving failed large banks. The political price would be that progressives don't get to offer floor amendments. Under Dodd's scheme, which is favored by Obama's legislative and economic advisers, the Senate would immediately vote to take up the bill, and would then vote cloture by a wide bipartisan margin. The bill -- still a shell with details to be filled in later -- would go directly to the House, where the House-passed bill would become the vehicle for the final measure.

This course would be an appalling abdication, and it would be stupid politics. The protestations by the Republican Senate leader, Mitch McConnell, that the Democrats are proposing a pro-Wall Street bill, have been ringing increasingly hollow. It's Republicans who have been working hand in glove with Wall Street lobbyists. The problem is that so have several Democrats, including Treasury Secretary Tim Geithner.

If the bipartisan strategy is adopted, both parties will declare victory and go home. Some of Obama's advisers think this is smart politics because it gets financial reform off the table, and presumably gets it off talk radio because the Republicans will have been enlisted as partners. But think again. Anything that Mitch McConnell can support is not worth having. And if Obama's tactical advisers think that passing a feeble bill will make the anti-Wall Street popular sentiment disappear, they are kidding themselves. Regular Americans will just see both parties as sellouts, and the tea parties will get new recruits.

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