Whatever you think about the financial regulation bill that finally passed in the Senate Thursday night, you can't say it’s not a big deal. It’s 1500 pages long, and just take a look at Journal’s précis of its major provisions.
When was the last time Congress passed a bill so large that even its significant provisions resisted summarization, both for reasons of complexity and enormity? If you said “health care,” well, perhaps you’re noticing a pattern. Once again, Democrats spent the better part of a year playing three-dimensional chess with themselves, lobbyists, and Republicans to pass a middling bill whose ultimate effect no one can confidently predict. And forget this “No Drama Obama” nonsense. This bill, like the health care legislation, had more than its fair share of cliffhangers.
The Obama team lets Congress take the lead and there, the lobbyists play their game of tug-of-war with the public interest.
Harry Reid had to get Maria Cantwell (D W.A) to vote to allow the legislation onto the Senate floor, only to see her vote against its final passage because she finds it to be too wimpy. Reid also had to prevent a vote on what might have been one of the bill’s most popular provisions: the amendment proposed by Jeff Merkley (D-Ore.) and Carl Levin’s (D-Mich.) to strengthen the Volcker Rule, barring banks from risky proprietary trading. The banks were so afraid that this would pass, they convinced Sam Brownback to drop his amendment exempting the lending institutions set up by car dealers from regulation by the new Consumer Financial Protection Agency (something they got in the House version). No amendments were allowed and the bill passed as proposed.
And again, like with health care, liberals left feeling queasy at best. Cantwell and Feingold voted against the bill. Merkley voted for it but complained that the reason his amendment was barred by the leadership was the fact that “it would probably pass and Wall Street doesn't want it to pass, but the second reason is, I believe that colleagues who were planning to vote no didn't want to have to vote no. If they voted no it would make Wall Street happy but would make their constituents mad, because this is the type of fundamental reform that is expected for us to get done.”
For a bit more déjà vu, Republicans, save three Northeasterners, and one Iowan up for re-election, all think it stinks. Once again, they are as one with Thomas J. Donohue, president of the U.S. Chamber of Commerce, who said, "If you want to drive capital out of the United States, this is your bill.”
So yes, we have a pattern here. The Obama team lets Congress take the lead and there, the lobbyists play their game of tug-of-war with the public interest. A watered-down rough draft emerges, in which the Republicans, after long negotiations, decide that, after all, they can’t really support the thing, much as they would like to in, say, some other universe. Even so, they get much of what they want simply because a) Democrats need lobbyists’ cash just as much as Republicans do, and b) the Obama administration remains desperate to pursue bipartisan solutions to America’s problems, even though it has long ago lost any hope of actually achieving them.
In the case of financial regulation, they made these compromises even though, unlike health care, they enjoyed strong public support for a harder line. It’s not just Levin/Merkley that was dropped. Sheldon Whitehouse (D-R.I.) was unable to pass his amendment that would have let states cap credit-card interest rates and impose restrictions on rates charged by out-of-state lenders. With some banks charging nearly 30 percent interest on money the government is lending them for free, who would be against that? (Merkley, as it happens, is from Delaware, where the banks holding this usurious debt are located.)
Meanwhile, the Federal Reserve, whose asleep-at-the-switch regulation turned out to be so costly, came away happy. They need to deal with only a one-time audit of previous mistakes, and lost almost none of the agency’s awesome power to make them again. As the AP reported, the Fed “retained supervision over bank holding companies and state-chartered banks and would also oversee any large interconnected nonbank financial firm deemed a potential risk to the financial system.”
All of this is the result of an extremely complicated and confusing set of compromises among too many forces even to name, much less explain. But they all occur inside a pretty simple framework. On the one hand, taxpayers were mad as hell. When Goldman Sachs found itself facing both civil and potential criminal charges, the story had its clear villain and Democrats could have tried to go much further than they did in reigning in abusive practices.
But that’s the public game. In private, the banking industry has been making friends and influencing Congress, literally, for centuries. (“They frankly own the place" explained Sen. Richard Durbin, D-Ill., in 2009.) And for the past year, they have been using every resource at their collective disposal to weaken both houses’ reform plans. Remember, according to Public Citizen, over seventy ex-members of Congress could be found lobbying for Wall Street and the financial services sector in 2009, including two former Senate majority leaders, two former House majority leaders, and a former House speaker. At the staff level, the numbers are even more impressive, with literally hundreds of ex-staffers on the banks’ payrolls and hundreds more planning to join them in the near future. They will still be there when the rest of us have stopped paying attention.
But given that even in dumbed-down, oversimplified journalese, the actual provisions of this bill are beyond the capacity of most of us to understand, it must be counted as a major political victory for Obama and his maddening commitment to reasonableness at all costs. The dude got the job done, again. He’s “doing something,” and looking like a winner as he does it. And Republicans, worried about the Tea Party/Jacobin element of their own base, are going to be hard-pressed to make too much of their failure to protect the banks next time around.
Should the Obama and the Democrats have done more? Sure. Could they have done more? Well, that’s the question that keeps haunting Obama supporters. In the meantime, we’re back where we were the first time he disappointed us… hoping he really does know best.
Eric Alterman is a professor of English and journalism at Brooklyn College and a professor of journalism at CUNY Graduate School of Journalism. He is the author, most recently, of Why We're Liberals: A Handbook for Restoring America's Important Ideals.