Things have been moving pretty quickly lately in the interlocking worlds of politics and financial reform. While there is a lot we don't know, here are three statements we can probably make with a high degree of certainty:
1. If the banks had been on the ballot yesterday voters in both parties would've voted them down.
2. A couple of determined senators can make a difference.
3. If you want to rally the troops, don't use Larry Summers as your general.
I liked Zach Carter's framing of today's Senate action as a "war on Wall Street reform," which I suppose makes anybody covering this conflict a war correspondent. So excuse me while I throw on this little dust-colored field jacket, the one with the shiny buckles and military-style epaulets, to summarize the action on these two fronts. (Since we're going all CNN-like here, here's a quick commercial: Zach and I will both be at the Campaign for America's Future conference June 7-9, along with luminaries galore like Nancy Pelosi, Arianna, Kos, Howard Dean, etc; much discussion of this topic will ensue. Join us!)
Back to our regularly scheduled programming: Nate Silver's overall conclusion about the key races seems right -- the conventional wisdom about what these races "mean" isn't necessarily all that accurate. That said, there does seem to be a through-line, at least in the Rand Paul and Joe Sestak races, of repudiation for insider Washington politics and its 'centrist' assumptions. And what's more 'centrist' in Washington than the assumption that we need to shy away from major reform of the banking system? (The 61/33 vote against the Brown/Kaufman amendment to break up the big banks -- the single most important reform we need -- represented the most 'bipartisan' endorsement of Wall Street and its campaign dollars that we've seen in some time.)
Nevertheless, less than 24 hours after the polls closed, the Senate leadership moved to end debate on financial reform, without even discussing some of the most critical remaining initiatives. Maybe they weren't watching the election returns, which showed that clubby insider politics is pretty unpopular right now. Whatever the reasons, the cloture vote failed and (at least for now) the amendments will be discussed and voted on. Not that they can't be voted down or killed by fiat (in conference or through a "manager's amendment"). But for now, those amendments live.
Maybe the Republican leadership didn't get the memo. They used procedural tricks to stall the Whitehouse amendment, which would allow states to set interest rates for their citizens. (Funny how that "states' rights" talk goes out the window when somebody flashes a few Benjamins.) They gave big gimmes to the predators in the payday loan industry by blocking the Hagan Amendment. And their parliamentary shenanigans forced Merkley and Levin to attach their amendment -- which prevents banks from gambling with publicly-backed cheap money -- to Sam Brownback's giveaway to auto dealers.
What an opportunity for Democrats to capitalize on the populist surge and use public anti-bank sentiment to enact real change! Unless, of course, they do .... what they did, which is yield to the GOP and try forcing the bill through as is. It's understandable, in one way -- if Republicans are paralyzing the Senate to protect the banks, many Democratic senators no doubt felt they should get what they can. Senators like Levin and Dorgan, who threatened to oppose this vote, were no doubt promised some improvements in the bill. So they're not "bad guys" -- but they did miscalculate: They assumed that progressive senators would eventually cave. They won over their two favorite Republicans, Sens. Snowe and Collins, but lost Feingold and Cantwell.
Feingold and Cantwell did the right thing. Snowe and Collins are the same two Republicans who held healthcare reform hostage for weeks and eventually provided no meaningful support. By forcing the leadership to negotiate with the left as well as the 'moderate' right, these two senators may have changed the future of financial reform for the better.
How important is Merkley/Levin? Now that Brown/Kaufman has gone down, it's the most important provision left. Without it the entire system remains at risk, as giant banks continue to engage in high-risk trading on their own behalf. That's the kind of activity that could cause another disaster, and which probably explains how four mega-banks went an entire quarter without losing money on trades ... while the clients that take their advice fared far worse. The Hagan and Whitehouse Amendments are also important, and they deserve a full vote in the Senate.
As for Larry Summers, the Administration sent him to the Senate yesterday to make a patently false claim: "If you vote for cloture right now and don't add any more amendments, we will have solved the issues that led to (the last) crisis." The bill improves upon the status quo, but Summers is making a much broader claim, which he then repeated: "Had this been law, as is, in 2007, we would not have had the crisis." Nobody really believes that -- least of all Nouriel Roubini, who said the reform bill's changes were "cosmetic" and that "there is a risk of ending up in another crisis, as the world found itself in the Depression of 1933."
Summers recently defended his miscalculations during the Clinton Administration by saying "Credit default swaps were in their infancy in the 1990s. There was no large market in them ..." In other words, all the animals were inside the barn when I opened the door. How could I know they'd get loose?
Quick overview: Larry Summers -- wrong about the risks; didn't see the last crisis coming. Nouriel Roubini -- right about the risks; predicted the last crisis. Who are you gonna believe? Besides, if there's one thing you could probably get Rand Paul voters in Kentucky and most Joe Sestak voters in Pennsylvania to agree upon, it's lack of confidence in Larry Summers (along with Geithner et al.)
With that choice of general, no wonder the Administration and the Senate leadership lost today's battle. The question now is, can they find the strategy ... and the generals ... needed to win the war? Here are the names of two officers who might deserve a field promotion: Russ Feingold and Maria Cantwell.
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Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
Stuart Whatley: Financial Reform Won't Alter Capitalism's Icarus Trajectory
This era's troubling reality is that economics now dictates our cultural values. We no longer have a say in how resources, production, and mutual prosperity should be systematized to achieve the best society for all.
Paul set himself up to be 2010's Barry Goldwater -- whose radical libertarianism turns him from right wing darling to general election loser. Only in 1964, Goldwater's views weren't counter to nearly 50 years of settled Supreme Court law.
Richard (RJ) Eskow: Traded-in: These "Used" Senators Sold out the Troops for Auto Dealer Cash
If you have a yellow "Support Our Troops" sticker on your car -- or even if you don't -- you should know the name of the Senators who just sold out our troops, their families, and our military readiness for easy cash offered by auto dealers.
13 Bankers and/or equivalent(s) ought to be required pre-reading for the conference in June.
Given that that which has occurred very recently/is now occurring in Congress has done so post the publication of 13 Bankers, perhaps there should be some strategizing as to how something akin to the Pecora Commission can be established and given saturation coverage from start to finish to counter the astounding arrogance of Wall Street and simultaneously expose the obstructionists and/or the compromised of BOTH parties very far and very wide, regardless as to how far into the stratosphere it reaches. The profound malefic effects of cash-polluted lobbying also need to be thoroughly exposed with crystal clarity.
Parenthetically, if such was to happen, there ought to be maximum primary sources. That is, NO talking heads breaking in to say what someone is saying/has said, while he or she or anyone else principally involved is saying something/anything. Interpret some other time.
Sestak, I predict, will turn out to be more of a status quo politician than he advertised himself as being...
I have yet to read a serious economist who believes that the financial reform will prevent a future financial collapse on Wall Street; or, that this future collapse will not be larger and more catastrophic than the last one; or, that it would not endanger the U.S. economy as a whole.
The good news is that the only people preparing a future financial collapse are the far right-wing. Their entire strategy is premised on this collapse and has been since the late 1990s. Frederick Clarkson and Adele Stan have written about it. Ron Paul and his advisors are very explicit about it.
Good job, political elite.
And, I'm not sure if you realize that this is just the beginning of the reform process.
He hasn't figured out, it no longer is whether Geithner and Summers can get the job done -- makes no difference -- it's about the perception that no matter what that team does (actually good or bad) they will have screwed the working middle class Joe and Jane. Elliott Spitzer has a good deal more credibility than these dudes -- and rightly so (i.e., he didn't screw the country)!
It is mind-blowing to see that Republican "leadership" is still dragging its feet on financial reform, and many other issues that will lift up our nation from the depth of despair to the height of excitement.
When I listen to Republican leadership, I feel like a reverse evolution is being played. How dumb they can be if they do not realize the clock can never be turned back. It is one directional movement of history. Turn the clock back for a short time (DICK/Bush era), you create so many problems that would spin heads off like a centrifuge. It is no longer the world of our grandfathers and McCarthy... DICK tried it and it backfired like an atomic bomb.
But in civilian life, the Peter Principle is the norm: Yee shall rise to your highest level of incompetence. (Fanned for having higher expectations.)
Even if I agree with this article, the above copied quote is completely wrong and the finality is much worse than what is exposed. Banks take currently NO risk in their trading, that's why they can post a full quarter without one day of loss. How do they do that, roughly: they borrow from the FED at 0% and lend back to the Treasury through Treasury bonds at 3.7%! Why is this a no risk situation? In a free market, the risk would be an increase in borrowing rates or an increase in long term rates that would immediately reduce the value of the Treasury bonds in their portfolio. We are not in a free market economy. A virtuous circle has been created with the majors banks, the FED and the Treasury as participants. A rate increase on the short term end will not happen. FED will keep interest rates low and if, an increase would be necessary, majors banks would be warn well in advance. On the long end of the curb (the 3.7% they cash-in), there is some market risk. I.e. China may want to sell its Treasury bonds. In this case the FED would quickly re enact quantitative easing and take the place of the sellers.
Why do you think it's a good idea to put states in charge of regulating usury? Wouldn't they make a soft target for lobbyists? Don't we tend to have less media watching state govt than watching Congress? How much analysis of state government do you see in today's Huffpost articles? If enforcement leads to a showdown between a backwater state vs. a megabank, which is more likely to prevail? If Congress has such difficulty regulating the megabanks, why do you think states, with fewer resources than the federal govt, will do a better job?
Under the Whitehouse bill, with a little pressure from lobbyists, couldn't states de-regulate usury just as easily as they could regulate it? Which outcome seems more likely?
Arizona is trying to revive the equivalent of Jim Crow laws, California can barely pass a budget every year, in Illinois they tried to sell a vacant senate seat to the highest bidder. Do you really trust states like these to regulate usury?
Senator Bernard Sanders' S.528 is a much tougher bill. It would cap consumer APR at 15%, nationwide, similar to old anti-usury laws that used to exist before de-regulation. This could help so many people to bootstrap themselves out of debt bondage.
The Whitehouse bill is more of a dodge than a solution -- hand the problem off to the states and let them take the blame for the mess that results. We can do better.
Financial reform is one of the few vehicles left (eliminating *any* cap on Big Oil liability is another) to draw sharp distinction between legitimate populism and the empty sloganeering of Republicans that masks corporate toadyism. And their response to the swelling wave of anti-incumbency demonstrated yet again last Tuesday is to stop fixing and vote on a weak bank bill that provides them with no popular support going into a tough election.
Amazing.
The score so far for incumbents who voted for TARP is 0-4.
If politicians don't understand that they can't vote for bailing out the banks that destroyed the jobs, houses and pensions of their constituents (along with the economies of the world) without also punishing those banks by breaking them up, they're simply uneducable.
They can't be saved from themselves.
This is a no brainer. I'll go with door #2. My only question is Prez Barack has enough brains (and cojones) to make the right choice too
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