Republicans Begin Strategic Retreat on Bill to Hold Wall Street Accountable

06/22/2010 05:12 am ET | Updated May 25, 2011

Yesterday, Iowa Republican Chuck Grassley signaled the beginning of strategic retreat by Republicans on the Senate bill to hold the Wall Street Banks accountable. He broke ranks with his party in the Agriculture Committee to support the Democratic measure to impose new regulations and transparency on the derivatives markets that were ground zero in the financial collapse that cost eight million Americans their jobs.

At the same time Republican leader Mitch McConnell made a major strategic shift, saying that Republicans now wanted to "improve" the bill -- not kill it outright.

The Republicans are acting like they are now in "negotiations" over what could be a "bi-partisan" bill. In fact they are being forced to retreat by the juggernaut of public opinion that is demanding action to hold the Wall Street Banks accountable.
They have slowly begun to recognize that their weak attempts to redefine the issue have failed. A new Democracy Corps poll demonstrates that their Orwellian assertion that the proposal is a "bailout bill" have fallen flat.

Finally, it is increasingly clear that rank-and-file Tea Party activists upon whom Republicans plan to depend this fall are becoming disillusioned by Republican attempts to represent the interests of Wall Street against those of Main Street.

This is a critical juncture. The response of Democratic proponents of holding Wall Street accountable should be uncompromising. When you have them on the run, that's the time to chase them -- to give them no quarter.

And that's exactly what the public wants. The worst thing Democrats could do is to weaken the measure in response to the Republican's new "more flexible" stance. And from all appearances, the President plans to hang tough.

In his speech today in New York, President Obama will say that his visit to New York is intended to counter "the furious efforts of industry lobbyists" to try to weaken or kill new financial reforms that are needed to stave off a second Great Depression.

He indicates that five key elements must be included in the bill:

• Protecting American Taxpayers in the event a large firm begins to fail;

• Limits on freewheeling trading and risks taken by banks (Volker Rule);

• New Transparency Rules for derivatives "and other complicated financial instruments;"

• Strong consumer protections;

• Pay reforms -- to give investors and pension holders "a stronger role in determining who manages the companies in which they've placed their savings."

And there is every reason to believe that Senators Reid and Dodd will be working off the same play book as the bill goes to the floor in the next few days.

The overwhelming public support for this measure has stiffened the spine of Democrats of every stripe -- including Senate moderates.

But we cannot mistake a strategic retreat for capitulation. The battle to hold Wall Street accountable will continue throughout the month of May as the Senate bill goes to the floor, and Senate and House bills are merged in conference. You can bet that the 1500 industry lobbyists (fifteen for each member of the Senate) will do everything they can to plant landmines in the path of the advancing pro-accountability army. There will be amendment after amendment on the Senate floor. Some will look benign. And the complexity of the issue cannot be allowed to provide a smokescreen for provisions that actually gut the bill.

At every stage in the next month the fundamental issues need to remain in high relief: will a particular provision provide tougher accountability for a Wall Street that is out of control, and endangers the economic prospects of every American?

We need to remember that this debate is not mainly about abstruse technical questions. It is about right and wrong. It is about whether a tiny number of Wall Street CEO's and traders have the right to risk the jobs and economic hopes of every American so they can make unimaginable fortunes for themselves. It is about whether they have the right to privatize enormous profits and socialize the risk in a "heads I win - tails you lose" hustle played out on a world scale.

It is about whether we allow exotic financial instruments that Warren Buffet calls "ticking time bombs" and "financial weapons of mass destruction" to once again explode and destroy the lives and hopes of millions of people across the planet.

The masters of Wall Street will continue to use their most potent weapon -- massive campaign contributions -- to entice Senators to weaken the bill.

The iconic meeting between Republican Leader Mitch McConnell, chief fundraiser Senator John Cornyn, and Wall Street traders a week and a half ago helped fuel the public backlash at their attempts to defend Wall Street. But it's hard to break old habits. After getting caught cozying up to lobbyists in New York City, the GOP's leaders are now bringing Wall Street to them. Today, Republican Minority Leader Mitch McConnell is co-hosting a fundraiser in Washington, D.C. along with financial industry lobbyists -- a day after he voted against bringing transparency to secret Wall Street bets. Another co-sponsor of the event, to benefit Sen. George Lemieux's (R-FL) Protect America PAC, is Wendy Grubbs, the vice president for Government Affairs at Citigroup. They are brazen.

The political momentum is completely with the forces of reform. Everything about Wall Street is politically radioactive -- their money, their lobbyists, their CEO's and all of the rationales they use to justify the greed and recklessness that cost eight million Americans their jobs.

There is simply no reason to compromise on anything material to get Republican votes. Enough Republicans will be forced to vote to hold Wall Street accountable in order to pass the legislation - otherwise they will face massive retaliation at the polls. That was certainly Grassley's calculation yesterday, and others will follow.

Now is no time to compromise. This time we need to demand unconditional surrender.

Robert Creamer is a long-time political organizer and strategist, and author of the recent book: Stand Up Straight: How Progressives Can Win, available on