What happened to the global economy and what we can do about it
with 37 comments
By Simon Johnson
After 9 months of hard fighting, yesterday financial reform came down to this: an amendment, proposed by Senators Jeff Merkley and Carl Levin that would have forced big banks to get rid of their speculative proprietary trading activities (i.e., a relatively strong version of the Volcker Rule.)
The amendment had picked up a great deal of support in recent weeks, partly because of unflagging support from Paul Volcker and partly because of the broader debate around the Brown-Kaufman amendment (which would have forced the biggest 6 banks to become smaller). Brown-Kaufman failed, 33-61, but it demonstrated that a growing number of senators were willing to confront the power of our biggest and worst banks.
Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote. Why?
Partly this was because of procedural maneuvers. Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote. Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.
Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership – and from the White House. Again, the long reach of Wall Street was at work.
But the important point here is quite different. If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated. That would have been a clear victory for the status quo.
But Merkley-Levin had momentum and could potentially have passed – reflecting a big change of opinion within the Senate (and more broadly around the country). The big banks were forced into overdrive to stop it.
The Volcker Rule, in its weaker Dodd bill form (“do a study and think about implementing”), perhaps will survive the upcoming House-Senate conference – although, because this process likely will not be televised, all kinds of bad things may happen behind closed doors. Regulators may also take the Volcker Rule more seriously – but the most probable outcome is that the Fed and other officials will get a great deal of discretion regarding how to implement the principles, and they will completely fudge the issue.
Most importantly, everyone who wants to rein in the largest banks now has a much clearer idea of what to push for, what to campaign on, and for what purpose to raise money. This is the completely reasonable and responsible ask:
When the mainstream consensus shifts in favor of these measures, or their functional equivalents, we will have finally begun the long process of reining in the dangerous economic and political power of our largest banks.
Written by Simon Johnson
May 21, 2010 at 9:02 am
Posted in Commentary
Tagged with Merkley-Levin
I wonder if without campaign finance reform we can begin the “long process?”
bill
May 21, 2010 at 9:26 am
Another example of how change doesn’t exactly happen overnight (http://en.wikipedia.org/wiki/Roman_empire)
Beth
May 21, 2010 at 9:28 am
Thank you for the guidance, direction. I will do it.
Lady in Red
May 21, 2010 at 9:44 am
Incomplete and unfinished are the kindest words for it. I’m not purchasing and I won’t recommend any of my friends or family to purchase individual stocks as long as Merkley-Levin is not enacted and enforced. It’s a simple as that. If others enjoy watching Goldman Sachs and other investment banks suck up the economy with fees, commissions, and stealing profits from individual investors on bid and asked spreads–well they can enjoy it. And I’m not paying for speculators’ swaps and derivatives with no capital to cover them for default.
I don’t come back for more after getting B_tch slapped by Blankfein and friends. If I wanted to lose money like some special ed. donkey I could just as easily try the slot machines or the race track.
Ted K
May 21, 2010 at 9:44 am
I found this link at Jesse’scrossroadscafe blog. Pretty apropos
http://4.bp.blogspot.com/_H2DePAZe2gA/S_XMmflvhOI/AAAAAAAAM3I/5KRpDOFteVo/s1600/bankersangst2.JPG
Ted K
May 21, 2010 at 9:58 am
Actions over words.
It is definitely time for others, besides Simon, to begin calling out the President on this issue.
To this point he has chosen to lock arms with Larry Summers and Jamie D. There are very few explanations for this course other than the obvious….it’s his true nature.
To date the Obama White House has presented the facade of ‘Apparent Hope, and Apparent Change’. Not quite the image that we bought in 2008 but oh well, maybe we can shame him into following through on his promises. So far our view of the image is only available after having passed through a house-of-mirrors.
Gene
May 21, 2010 at 10:06 am
On the amendment from FT — different view
“The amendment from Jeff Merkley, the Democratic senator from Oregon, and Carl Levin, the Democrat from Michigan, had been attached to a Republican amendment which the Republicans withdrew.
However, the Senate passed a motion instructing the language to be included during the conference process during which its bill will be merged with the House version, leaving an open question as to whether the amendment will be made law.”
Juan A.
May 21, 2010 at 10:07 am
Do you have a link to that FT article?
Ilan
May 21, 2010 at 10:20 am
Let’s face it, by the time the bill comes out of conference the bank lobby will have completed the process of emasculating and remaining elements of reform.
g.h.kirsch
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