The stakes in the war over financial reform are deadly serious, but I also have to admit it is fun to watch. It has dawned on politicians of both parties that voters' anger at Wall Street is not fading anytime soon, and that the usual insider establishment political tactics aren't working exactly the way they usually do. I have heard a peep lately whining about class warfare because, well, everyone is doing it whether they mean it or not. Republicans and certain Democrats who have taken a lot of money from Wall Street are trying to sound populist, but they are getting nervous that they may have to face some tough decisions on votes around certain amendments. It happened in the House when Alan Grayson forced a vote on opening up the Federal Reserve to an audit, and the banking lobbyists that control the Federal Reserve weren't able to defeat the amendment in a public vote on the floor, and it may well happen again in the Senate on some amendments.
The Republicans have put themselves in a tricky situation by using the Frank Luntz talking points about how the bill encourages more Too Big To Fail bailouts. In the short run, it's a good line, but now when they have to vote on specific amendments being offered to break up the big banks and bring them down to size, thus actually doing something real about the Too Big To Fail issue, they have put themselves in a very bad place. One amendment that will make them squirm for sure is the one just introduced by Sherrod Brown and Ted Kaufman. They call it the Safe Banking Act of 2010. It puts hard leverage and size caps financial institutions, limiting total assets to 3% of GDP for any financial company, and only 2% for banks. Given that the six biggest banks have holdings equal to over 60% of GDP, this bill would force the mega-banks to break themselves up. The bill also puts a hard cap of 6% on banks' ability to leverage loans, making the ratio about 16-1 rather than the 50-1 or worse leveraging going on in recent years.
In the meantime, the battle on the issue is being joined off the senate floor by both progressive reformers and fake grassroots groups on the side of the bank lobby. The Roosevelt Institute put together a letter signed by 36 economists and businesspeople calling for a much stronger bill, while the bankers are funding phony front groups with an anti-bank progressive populist message opposing any bill (their cynicism would be stunning if they weren't, well, the Wall Street bankers who destroyed the economy and then screamed for a bailout). Check out this unbelievably cheeky ad the bank front groups are running, and check out this superb segment on Rachel Maddow's show last night where she exposed their game and nailed the hypocrites to the wall. We are going to see a lot more of this faux populism paid for by bailed out bankers before the year is through, and progressives have to be quick to expose it. Thanks to Rachel for calling out their lies last night.
Goldman Sachs, JP Morgan Chase, and these other mega-banks committed fraud in banking, and now they are committing fraud in messaging. The banking wars are in full scale battle mode. If we can continue to expose their fraud, we can win this battle. Here's how I look at the House and Senate bills: they both have nuggets of gold, they both have some weak links, they both have some solid reasonable language, and neither goes far enough. But the big banks are overplaying a weak hand by this kind of blatant lying ad campaign, and we have a chance to isolate them even further in this debate. The potential for making the final bill better if the big banks get ostracized they way they deserve is huge. Forcing a vote on the Brown/Kaufman amendment is incredibly important. We might just win at least some of these battles in spite of the tens of millions being spent by the big boys on Wall Street.
Cross-posted at OpenLeft
You can read all of my work on financial reform, health care and other topics at my home blog, OpenLeft.com.
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