05/22/2010 05:12 am ET Updated May 25, 2011

Waterloo Sunset: Financial Obstructionism Could Be GOP Political Suicide

Sen. Jim DeMint famously predicted that health reform would be Obama's "Waterloo(1)," saying: "If we're able to stop Obama on this ... it will break him." It looks like Jim DeMint's crowd might be using the same obstructionist strategy toward financial reform.

Here's a word of advice for the opposition party: If you blockade financial reform and cozy up too publicly to the big banks, it could be your Waterloo.

Reuters reports that Republicans plan to introduce roughly 300 amendments to Sen. Dodd's draft financial reform. One amendment would eliminate a fund to cover bailouts, increasing the likelihood of future AIG-type rescues on the taxpayer dime. Another would eliminate proposed rules for regulating derivatives, to be replaced by an unnamed strategy to be named at a future date. Others would weaken the already watered-down oversight council to monitor systemic risk. And the sheer volume of amendments seems designed to delay or cripple the reform process, not amend it.

The bottom line is this: It's been two years since the financial meltdown and Congress hasn't acted. A bill is being readied for floor debate - an inadequate bill, but still something - and the Republican strategy seems to be delay and obstruction. One hundred amendments are being introduced by one Senator alone, Dodd's GOP counterpart Richard Shelby. (Of course, not all amendments are bad; this bill could use a few to strengthen its weak points.)

How will this play with voters? Banks are still publicly despised, according to a recent ABC News poll. 77% say they haven't done enough to "make amends" for their role in the crisis. 55% of people say they are "somewhat" or "very" angry at the banks for their behavior, and 79% are angry about bank bonuses. While these numbers are down somewhat from a year ago, 62% of Americans want more reform (including 62% of independents and 51% of Republicans), according to another ABC News poll. A Pew study showed that 68% of those polled had a negative view of banks and financial institutions and 59% wanted stricter regulations.

Even the Tea Parties have a strong anti-bank, populist element. How would the Tea Party crowd (much less the public at large) react, for example, if they heard Rep. John Boehner's pep talk to "an enthusiastic crowd of bankers" at the American Bankers Association?

Boehner's remark about "little punk staffers" at that meeting got a lot of play in the blogosphere, but another comment may be more important: "If the Senate is able to produce a bill, I think it's just as likely that we'll be talking about the same issue a year from now as we are right now ... I don't know how they ever come to an agreement on some kind of a bill they can bring back to both houses and pass," Boehner was all but promising delay, only a few minutes after the Bankers Association President had said "every day that passes gives more leverage to (reform opponent) Shelby."

Politicians of both parties flirt with Wall Street, but Boehner's gone further. He's "sexting" it - and out in public, where everyone can see.

Boehner's cynical promise to bankers - we'll stall as long as we can - came on the heels of his sales pitch to JPMorganChase head Jamie Dimon, in which he promised that the GOP would provide a better return on Wall Street's campaign contribution dollar. He and Shelby seem determined to make good on that promise. Will there be a price to pay at the polls?

The answer depends in part on how well supporters of financial reform make their case. They've waited too long to wage a full-throated campaign, partially because they were distracted by health reform. In the Senate, Chris Dodd seems poised to replay the political blunders that dragged out the health debate. His watered-down "compromises" - made despite no GOP support in return - is now the basis for even moredilution of urgently needed reform.

On the plus side, President Obama spoke clearly and forcefully on financial reform in Saturday's State of the Union message. He's weighing in early on this Senate debate, rather than waiting through long, damaging months of debate as he did with health reform.

The President was wise to attack reform opponents like Boehner for cozying up to Wall Street. But it was disquieting to hear him say that "Senator Chris Dodd and his committee have offered a strong foundation for reform, " adding inaccurately that Dodd's bill was "in line with the reform bill passed by the House." He needs to clearly and publicly identify the weaknesses in Dodd's bill, then work to have them strengthened.

Reports today suggest that the Republicans may wait until the bill reaches the Senate floor before introducing their amendments. Congress Daily (behind a firewall) reports that efforts will continue on a compromise markeup before then, and Sen. Bob Corker sounds optimistic about cutting a deal (although, just to be sure, he's introduced 98 amendments of his own).

It would be a mistake for reform backers to cave or compromise too quickly. Core issues like the CFPA and the Volcker shouldn't be treated like the public option, given lip service and then dropped without a fight. The fundamental elements of reform also give reform supporters a story they can tell at election time.

The GOP is playing with fire. It could pay a heavy price in November if its Senators act as the banking industry's enforcers. Republicans may not believe that these expressions of concern for their well-being are sincere - and maybe they're not. But the reality's the same either way: Getting in bed with Wall Street could be a recipe for electoral disaster.

UPDATE: The bill has passed out of Committee, and a statement from the President today included these words: " ...(I) will continue to fight to strengthen the bill and against attempts to undermine the independence of this (CFPA) agency. I will also oppose efforts to add loopholes that could harm consumers or investors, or that allow institutions to avoid oversight that is critical for financial stability. I urge those in the Senate who support these efforts to resist pressure from those who would preserve the status quo ..."

(1) DeMint was referring to Napoleon's career-ending defeat, of course, and not to "Waterloo Sunset," the Kinks song which Robert Christgau only slightly overpraised when he called it "the most beautiful song in the English language."

Richard (RJ) Eskow, a consultant and writer, is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard blogs at:

No Middle Class Health Tax
A Night Light

Website: Eskow and Associates