As Robert Kuttner writes today, Senate Democratic leaders Harry Reid and Dick Durbin are pushing for some dramatic up or down votes next week that would force Republicans (and some Democrats) to either vote aye -- or publicly cast their lot with Wall Street.
Barring a last-minute weak-enough-for-the-GOP compromise between Democratic Sen. Chris Dodd and Republican Sen. Richard Shelby, senators will be presented with dramatic yes-or-no choices on financial reform. Proceed or don't proceed? Regulate derivatives or not? And so on.
Finally, it won't matter what they say. After all, these guys say anything they want.
What'll matter is how they vote.
But what remains unclear is whether there will be an up-or-down vote on one of the most important -- and certainly one of the most politically compelling -- issues of them all: Ending "Too Big to Fail" once and for all, by breaking up the megabanks.
The current version of the Democratic Senate bill proposes to end TBTF not by setting size limits, but by giving the government greater powers to seize and reorganize even the largest companies, rather than having to choose between bailing them out or letting them crash spectacularly.
Now there are surely some members of Congress who sincerely believe that with these new powers, government regulators will be up to the task of gently dismantling even the most behemoth of banks in case of disaster. But there's no way they can be entirely sure.
And even if that part works, it's safe to say that an entity as big as Goldman Sachs has an overly -- if not obscenely -- large amount of political clout, with which it can bend, break or simply rewrite the rules if it comes to that.
And finally, there's the perverse drive that mongobank CEOs seem to have: to get even bigger. That trend has actually accelerated since the financial crisis. Do we really want these banks to get bigger yet? Is JPGoldSachMorgan far behind? There seems to be no such thing as big enough for these people.
Five Democratic senators, including Ted Kaufman of Delaware and Sherrod Brown of Ohio, introduced the SAFE Banking Act of 2010 on Wednesday, which would limit the maximum amount of non-deposit liabilities at financial institutions to an amount of money equal to two percent of the country's total annual output. (It would be three percent for non-bank institutions).
The six largest U.S. banks now have total assets estimated to be in excess of 63 percent of GDP.
The irony is that the bank break-up proposal at issue is, as Dean Baker puts it, "remarkably tame." Baker, co-director of the progressive Center for Economic and Policy Research, tells HuffPost that two percent "is hardly clamping down on big banks in a major way."
But that's also clarifying. "If you're not prepared to sign on to that, I don't know how you can say you're serious about being against Too Big To Fail," he said.
Nothing in the current Senate bill comes close to being as threatening to the fundamental way Wall Street does business, Baker said. "This isn't talking about making them little guys. But it is anathema. They want to get bigger, not smaller."
Baker is also very concerned at the influence such banks have over the very organizations that are supposed to keep them in check. "The basic story with any regulator is always going to be judgment calls; there's no way around that, and the industry's always going to have an argument... What you need is for your regulator to say no," Baker said.
But look at the incentive structure. If a regulators upset an uberbank, the uberbanker can make a call to his friends at Treasury, the White House, or Congress, and "some of them are going to find themselves in a lot of hot water.
"What's the incentive on the other side?" Baker asked. Well, what happens when regulators look the other way so intensely that the entire financial system blows up in their face? This is not a theoretical question.
"Did any regulators lose their job?" Baker asked.
Ryan Grim writes today that a test vote in the Senate Budget Committee on Thursday showed stronger support for breaking up big banks than had previously been suspected.
Nevertheless, there is a realistic argument against the Kaufman-Brown proposal, and it goes something like this: Precisely because of the colossal political clout these gargantobanks already have, there is simply no way they'd ever let themselves lose a vote like this.
Majority Whip Durbin, famous for his unusually honest comment about the relationship between banks and Capitol Hill ("Frankly, they own the place") basically said as much on MSNBC Thursday afternoon.
"I would like to see more competition myself. I don't think there's anything inherently good about this concentration of wealth and power," Durbin said. But actually breaking the banks up is "a bridge too far for this Wall Street reform."
"I just don't think it's going to occur," he said. "Political realities suggest it might not occur even if it is the best policy that we would lean to."
What is that political reality, Ratigan asked.
"Well, you've got an awful lot of investment now in those banks and the people that work for them. And their investments around the world, around the United States. And I think anything that would be that massive and changing would go way beyond what could be accomplished in Congress."
But, Durbin pleaded: "Don't overlook the value of the bill that we are debating."