Hold the applause. The president would like us to celebrate his "Wall Street reform," but the legislation is misnamed. Barack Obama did not set out as president to reform Wall Street in fundamental ways but to restore it. Judging by the largest banks' booming stock prices and executive bonuses, he appears to have succeeded. The leading bankers expressed relief when they saw the reform package Congress cobbled together on June 25. Wall Street, loathed by citizens everywhere, dodged the bullet in Washington.
Deficits are the cure, not the disease.
Low-income mothers can't work without child care and can't afford child care without working. As local governments refuse funding for child-care subsidies, moms are ending up back on welfare rolls.
Congress followed Obama's path and rejected the sterner measures that promised to actually change things. As with healthcare reform, the White House, joined by the Treasury and the Federal Reserve, spent much of its energy opposing more aggressive ideas or bargaining small-bore compromises. The president kept a low profile, saving himself for the victory celebration.
Despite the defeat of real reform, progressives should not despair—the future looks much brighter than the headlines suggest. Yes, Congress choked on the hard questions. But assuming the Dems pull together last-minute wavering votes, it will be a stronger bill than either the White House or the bankers had intended, thanks to public anger, popular mobilization and nimble pressure from reformers.
This is not the end of reform; it's the beginning of a promising struggle to cut the financial sector down to tolerable dimensions and reduced power. The forces of reform demonstrated that they have the strength and especially the ideas to win this fight—just not this year.
Mainly, the legislation gives government regulators explicit authority to take tougher measures to curb Wall Street's dangerous behavior, but only if the Fed and Treasury decide it's a good idea. Don't hold your breath. These same agencies failed massively to confront the rampant recklessness that led to collapse (many of them claimed not to have seen the trouble coming).
Once again, the risk-taking is assigned to unwitting citizens and the economy. Washington saved big-dog bankers from failure, but it has not saved the rest of us from the bankers. Some reformers want to make the best of mixed results. The Consumer Federation of America says the banks "won a few battles; they lost the war." I would say it is the other way around: reform won some battles but lost the war.
Some valuable improvements, like the Consumer Financial Protection Agency, can lead to tougher rules, but even such worthy accomplishments were diluted in the fine print. The supposedly "independent" consumer agency is to be a "bureau" within the Federal Reserve, where hostile central bankers can find ways to smother the infant in its crib.
The improved controls on dangerous derivatives were likewise weakened in last-minute deal-making that gave bankers much of what they wanted—a free hand to keep the casino open for the gamblers. Bottom line: key elements of financial abuse that contributed to the breakdown have not been eliminated. And taxpayers are still on the hook for bailing out "too big to fail" banks.
Yet despite disappointing results, the losing issues revealed reasons for optimism. Think of this as Round One. We witnessed a surprisingly strong preview of Round Two in the aggressive reforms pushed by some Democratic senators. These proposals could someday—maybe sooner than we imagine—constitute the platform for authentic reordering of the banking system.
In the trenches the legislative battle was Democrats against Democrats (Republican senators were united in opposing everything). These roll calls made visible the deeply conflicted purposes of the party—the awkward straddle Democrats have maintained for three decades. Is it the party of working people or the party of big money? Democrats have for some time wanted to be both, but this year's action exposed the contradiction more starkly and put the two sides into repeated collision.
Senator Byron Dorgan's amendment would have outlawed the exotic "naked" credit default swaps, which let bankers and others bet on assets they do not own (like buying fire insurance on your neighbor's house, then lighting the match). Other Democrats decided to table Dorgan's measure rather than choose between Wall Street and public anger at Wall Street. Dorgan's issue lost big, thirty-eight to fifty-seven, but it won among Dems, thirty-six to eighteen.
Senator Sheldon Whitehouse's amendment on usury would have repealed the federal pre-emption that prevents states from enacting their own limits on consumer interest rates. Whitehouse got thirty-three Democrats for, twenty-one against. Roughly speaking, these roll calls joined old liberals and younger, newer senators against the party's center-right establishment, which is typically closer to financial patrons.
Senator Sherrod Brown's amendment followed the same pattern but on a far more fundamental issue—forcing the largest, most dominant banks to get smaller, breaking up concentrated financial power. Brown won among Democrats—thirty yes, twenty-seven no—though not enough to overcome Republican naysayers. Still, the Ohio senator came away remarkably optimistic about eventually winning.
"We got a majority of Democrats on the floor but almost nobody on the banking committee," Brown said. "It reminded me that this institution was built to protect the status quo—to protect the powerful against the people. In this chamber, we all sing with an upper-class accent, so to speak."
Yet Brown sees the path by which breaking up the banks will be forced back before Congress. "In the long term, we are going to win this issue," he said. "I can't say what the long term is, but the business community is eventually going to be for it." That's because the legislation implicitly awards privileged status to the very largest financial institutions, which means the disadvantages of "too big to fail" will fall upon smaller banks and other corporations. That, Brown thinks, will build the support among them for decisive reform. "The biggest banks get a built-in advantage because capital markets understand, or believe, that these big banks will never be allowed to fail," the senator explained. "Therefore, they get a lower interest rate when raising capital—seventy basis points or so—and therefore businesses naturally want to deal with them. So these big banks will get bigger and bigger."
The logic did not persuade this time around. "The argument against my amendment, implicitly, was, It's a radical thing to break up the banks—we can't go that far," Brown says. "The explicit argument was, We can't do that because it would disarm the country in global finance. That doesn't make any sense. You don't need $50 billion banks to get economies of scale."
Brown's spirit of confident optimism is the model for sustaining reform politics. As he sees it, liberal advocates can win if they do the hard work of explaining and recruiting not just among kindred spirits but among normally conservative business interests and ordinary apolitical citizens who don't call themselves liberal or progressive. Both groups are deeply angered and feeling threatened by the swelling concentration of Wall Street power. "It will not take another financial crisis to get back to breaking up the banks," Brown predicted.
A similar strategy is being taken up by labor and citizen reform groups, especially those outside the Beltway, like National People's Action. They intend to aim direct action at banks and focus on people's concrete grievances. That starts with the foreclosure crisis, which Washington has shamefully neglected.
Instead of congratulating Democrats for enacting timid measures, we should show them what we have in mind for Round Two.
If you like this article, consider making a donation.
Reprint this article. Click here for rights and information.
Lets hope it truly is the beginning of a long-term, hard changing reform. So far most of the talk and reforming seem to be mostly smoke and mirrors, to "pacify" the rightly angered populace. The biggest problem is that theres no regulation on the privately owned FED and as long as thats the case it is the FED who holds the politicians and people in its grip and not the other way around, like it should. So its hard to say how true reform could really be accomplished.
---------------- We are all in the gutter but some of us are looking at the stars. - Oscar Wilde US assembled: IronKey
How much spam is on this web site now.The Senate has the bankers putting money in their pockets at all hours of the day.Byron Dorgan is retiring,Whitehouse and Brown are not up for re-election.The corporatists are more concerned with the crease in their pants than protecting consumers.
Let the parties run on their records in November.Post all of the votes for the various issues.Expose the Republicans for blocking help to common Americans.Post the facts,"NO" to health care reform,bank reform,and unemployment extensions.Let the Republicans explain why they fought anything that was potentially a political point.Let this group of mediocrity personified explain how they supported bailing out the bankers but turn their backs on the rest of America.Make these people be accountable to the public and watch the fumbling and bumbling.
posted by: nkurland1 at 07/03/2010 @ 1:35am
For context, banks had produced 40% of all profits in this country before the crisis; now they're down to 31%. The potential impact on the economy of major changes is substantial. Even ignoring lobbyists and contributions, Congress is going to be timid.
And realistically the choice for who is going to introduce Round 2 legislation is limited. Democrats are congratulating themselves for what they've already accomplished. Republicans are ... Republicans. Though the fact that Democrats receive most of the contributions from the relevant firms leaves room to manoeuvre.
So the idea that more revelations about the source of the problems and the bailout will increase pressure for action seems unlikely. Existing pressure produced what you see. And those Democratic votes in favor of more restrictive measures were safe votes because nothing was going to pass.
Seems to be a liberal Democratic fallacy that more information and detail-oriented debate is persuasive. Voters and people in Congress are less reasonable than assumed.
Business will have a choice of two opponents, the banks or the taxes and required expenditures which have been made law recently. As much as banks make business more difficult, responding to government actions deals with the more immediate threat. Especially if/when sympathetic Republicans have more influence.
Mr. Greider seems to feel that noise and pressure change minds. Maybe they do, eventually. But there seems little reason to believe that they will be significant factors soon. And the public does lose interest through years of an issue being ignored.
Expect the banks to outlast their opponents. Unfortunately.
good post. thank you
http://www.boulo.ma
posted by: Philidor at 07/02/2010 @ 9:35pm
Assuming Greider trusts Republicans is a complete inversion Occam's razor. The logic underlying expectations of further reform lies in the fact that the revelations from the FCIC and Fed audit will further fuel public anger towards the financial industry and thus pressure for additional reform measures. The system has already received a taste of that public anger, and despite a God awful reconciliation conference and lukewarm result, the bill is significantly stronger than originally anticipated.
Not to mention that financialization has pretty much shredded the real economy and the rest of the business community knows it. It seems undeniable to me that a business revolt against finance is bubbling under the surface. And once that happens, the sector as we know it is toast.
Arkansas California Colorado Connecticut Delaware DC
Florida Georgia Hawaii Idaho Illinois Indiana
Iowa Kansas Kentucky Louisiana Maine Maryland
Massachusetts Michigan Minnesota Mississippi Missouri Montana
Nebraska Nevada New Hampshire New Jersey New Mexico New York
North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania
Rhode Island South Carolina South Dakota Tennessee Texas Utah
Vermont Virginia Washington West Virginia Wisconsin Wyoming
Read Full Article »
