Personal reflections on the Wall Street reform deal

by: Chris Bowers

Fri Jun 25, 2010 at 10:59

At 5:39 am this morning, Wall Street reform conferees reached a deal:

A 20-hour marathon by members of a House-Senate conference committee to complete work on toughened financial rules culminated at 5:39 a.m. Friday in agreements on the two most contentious parts of the financial regulatory overhaul and a host of other provisions. Along party lines, the House conferees voted 20 to 11 to approve the bill; the Senate conferees voted 7 to 5 to approve.

The specifics are currently unavailable.  What reports are available is that Blanche Lincoln's "Section 716" on derivatives was significantly weakened, but not removed entirely. Also the Merkley-Levin "Volcker rule" was stronger than both the versions that passed the House and Senate, but it still contained a significant exemption to win Scott Brown's (R-MA) vote. Tim Fernholtz and David Dayen have these details. And yeah, we won the swipe fee bit.

The bill is murky, because this entire policy area is murky, and its consequences will be difficult to predict.  The main test of whether or not it succeeds will be a negative one--we will know it failed if another financial meltdown occurs.  In terms of reducing the concentrated power and wealth of larger financial institutions, the bill is relatively weak.  Even so, bigger banks and credit card companies will lose billions and billions in profits every year because of this legislation.  Consumers will receive more protection, too.

Later today, I will produce a list of the good things in the bill. This will not be done either to stick my head in the sand and deny that a lot of strong reforms were left on the table, or to give the people who engaged in the fight more credit than they deserve.  Instead, I simply want to let people know that good comes with the bad, and there efforts were not for nothing.  Not recognizing the achievements of the bill is to live in the same amount of denial as not recognizing its failures.  We need to know what we achieved, and what we did not achieve, and keep fighting.

The bill could unquestionably have been stronger.  However, what political steps were necessary to make it stronger are entirely unclear.  If different activists had a viable path to stronger reforms, either they did not articulate that path, or they did not execute that path.

If the bill proves not to be strong enough, then everyone who wanted stronger reforms failed.  Everyone.  No one gets an exemption, whether you engaged in the fight or not.  If our efforts and our complaints were not enough to achieve stronger reforms, we don't get bonus points when the next crash occurs.  The crash still happens.  The difference in culpability between those who attempted to stop it, and those who egged it one, is a difference of degree, not of type.

While everyone must decide who to act for her or himself, I personally feel a lot better when I engage these fights, then by sitting on the sideline saying how the fight itself sucked.  If we are going to fail, I feel a lot more pure if I tried, then if I just washed my hands of the entire matter.  For what it is worth, getting a chance to be close to the health care reform, Pennsylvania Senate primary, and wall Street reform these past 13 months has at least convinced me that politics really is run by actual, fallible people, rather than by vague, impersonal, irresistible forces.  We can make change, both for good and for bad.  Also, failure is an option--we absolutely can just screw everything up.  Perhaps most importantly, success is an option, but it only becomes one if we engage in the fight, and figure out a way to marshal enough people and resources behind the  causes we believe in, and do so in effective ways.

Chris Bowers :: Personal reflections on the Wall Street reform deal

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The Big Lie (4.00 / 4)
here is that this is the "biggest financial reform since the Great Depression."

Bull!  The "biggest financial reform since the Great Depression" was a whole series of deregulatory steps--some legislative, some executive orders, some court rulings--taken over a period of 30+ years.  Just this week, the Supreme Court took another such step--making it significantly harder to prosecute white collar mega-criminals like Jeffrey Skilling.

This law doesn't even roll things back to 1999.  It's a blip.  A hiccup.  Nothing more in the grand scheme of things.  We're still living in the Nixon-Reagan-Bush world. We're still waiting to elect the first DEMOCRATIC President since LBJ in 1964.  All this just skirmishing in the underbrush.  Nothing more.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

Elect? (4.00 / 1)
Paul we don't even nominate Democratic Presidents any more and lots of the Republicans are so far right of Reagan it is tragic.  Oh yeah, we have a center left country left to choose between far right and right with a dash of centrism.

[ Parent ]
success? (0.00 / 0)
The main test of whether or not it succeeds will be a negative one--we will know it failed if another financial meltdown occurs.

Is this specific legislation supposed to prevent that? Really? I was about to say, surely that's too strict a condition for what is really just a basket of minor reforms, but I guess that is what they claimed to be settting out to do when they started it all, isn't it - I'd genuinely forgotten.

In any case, since nothing in the bill addresses the root problems, the next meltdown is still kind of unrelated. We'll know our governing elites failed when it happens, but everything in this bill could go just swimmingly and not affect that.

Need more small-bore specific tests, I think - for instance, does the CFPA end up toothful or toothless?

not everything worth doing is profitable. not everything profitable is worth doing.

Now is an unfavorable climate for reform -- we missed our chance (4.00 / 2)
Right now, progressives have little power. The financial industry is back on its feet and the elite don't really care that unemployment is hovering around 10%. But back in October 2008, the financial market was about to implode and the elite were really scared that the entire system would collapse (and the rich would lose all their money). That was the time to demand real reform. But progressives were caught off-guard. We weren't able to mount a cohesive campaign to force fundamental change.

The TARP bailout bill should have included the repeal of all of the deregulatory actions that have been passed in the past 30 years. It should have included a tax on financial transactions to reduce speculative trades and computer-generated rapid trading. It should have included a wealth tax and a high tax on income over $250,000/family. It should have included massive taxes on companies that are "too big to fail." It should have included a Consumer Protection Agency. It should have included bans on predatory lending, balloon mortgages, etc. It should have included a ban on high-interest loans, high credit card interest rates, and high credit card swipe fees.

The stimulus bill should have included a Civilian Energy Corp that hired everyone who wants a job and put them to work insulating houses.

Since the current legislation is unlikely to prevent another financial crisis and since Congress is being stingy in trying to end unemployment, it is very likely that the economy will remain pretty stagnant for the next decade and also likely that we will have another financial crisis of some sort soon. When this happens, progressives need to be ready with legislation that can be forced into the Congressional hopper and with strong, unified support among progressives so that we can demand it is attached to any bailouts. And, of course, we need as many  progressives in Congress to fight for this legislation and to reduce the number of Congressmembers who support Wall Street corruption and greed.

Now is the time to plan for more financial collapse. With luck, people who are unemployed will begin to understand that Republicans, Tea Partiers, and corporate Democrats do not solve real problems, they just protect the elite and they'll develop a  more progressive orientation and support more real progressives. From my understanding of history, this is what happened in the 1930s and gave rise to the massive, radical labor movement. Now is the time to plan for and make this happen again.

This bill is weak (0.00 / 0)
And it's weak in part because Obama wanted it to be weak.

He opposed the efforts to end TBTF and to seriously regulate derivatives -- the 2 most important aspects of reform. (He also opposed the effort to control exec compensation and the strongest audit-the-fed bill.)

Those are simply the facts, and in this case Obama can't blame public opinion or the GOP or even consevadems.

Obama and his economic team did a pretty good job of keeping their positions concealed, but for those who care to look, their Wall Street-friendly neoliberalism has been laid bare.

A Win Is A Win (0.00 / 0)
Baseball is not my favorite sport, but the understanding that many successful baseball teams have about their game is, I think, a helpful perspective in legislative politics.  

A successful baseball hitter fails 7 out of 10 times.  A successful team wins 60-65% of its games.  It's not an all or nothing sport.  There's always another game tomorrow.

Of course the bill doesn't have everything we want.  What bill ever has?

Assuming it passes, it will in fact be (as Chris says) the biggest single progressive financial reform since the (multiple) reforms of the New Deal.

Based on Obama's campaign statements, and on how he has acted as President for the past 17 months, I see no reason to doubt that:

   1) his ambition is to initiate a generation of progressive governance just as Reagan initiated a generation of conservative governance;
   2) he is a center-left politician---just as his voting record in the Illinois and US Senates demonstrated.


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