11/27/2008 05:12 am ET Updated May 25, 2011

Regulating the Deadwood on Wall Street

The sensible reaction to last week's Congressional testimony by former Federal Reserve Board Chairman Alan Greenspan is: beware of deregulators bearing contrition.

The high rollers whose Wall Street casinos Greenspan heralded for years are unlikely to surrender their latter-day Deadwood without a fight. Indeed, Greenspan's testimony is more likely to prove a momentary mea culpa than a harbinger of any real reform.

The dust up over Bush's bailout offered a glimpse of what is likely to become the modus operandi of the Washington-Wall Street nexus going forward: abundant Congressional posturing -- save for a few ideologues on the Left and Right -- before the body as a whole rushes home to cover its collective aspirations.

Treasury Secretary Henry Paulson, meanwhile, is left holding the proverbial bag, which in this case contains $750 billion that the former Goldman Sachs executive has the power to dispense with limited restraint, if not impunity. If things go according to Beltway hole, the Wall Street cats will play while the Congressional mice are away.

The red ink on the bailout had barely dried, for example, when the sharks started swarming. Seeing $125 billion doled out to the nation's nine larger banks for interest rates half those that Warren Buffet got for his equity stake in Goldman Sachs, insurance and auto interests quickly surfaced at the Paulson ATM.

In short, the tellers haven't changed, only the window at which the money is withdrawn. After saving Goldman Sachs from the subprime conflagration, Paulson promptly appointed a Goldman Sachs underling to administer the bailout, proving cynics prescient who dubbed the scheme "Goldman Sach's socialism."

Hence, corporate interests now find themselves appealing for salvation to "public officials" who, as investment bankers, demanded market "disciplines" ranging from savaging workers' wages to offshoring U.S. manufacturing. Some salvation.

There is already evidence at hand that significant reregulation of the financial markets is anything but assured. Senator McCain's calls for reform have all the credibility of a hooker preaching abstinence. He was a major enabler of the speculators who caused the savings and loan debacle, and his campaign's chief economic adviser, former Texas Senator Phil Gramm, authored the legislation that cut the financial community free from its regulatory moorings.

Senator Obama has raised as much or more money from Wall Street as Senator McCain, and President Clinton's Secretary of the Treasury Robert Rubin, who pressed for repeal of Glass-Steagall, the depression era law that erected a firewall between commercial and investment banks, still holds sway in Obama's inner circle.

In light of Rubin's inability as Co-Chair of Citigroup to prevent it from nearly collapsing under the weight of its involvement in the subprime debacle, his enduring influence over policy makers may owe more to his fundraising prowess than to his reputation as a financial guru.

But Wall Street's influence over Democrats pales by comparison to the domination it has of Republicans, who were the Congressional force behind Clinton's push for NAFTA and repeal of Glass-Steagall, both of which were opposed by a majority of Democrats.

Real hope for reform of the financial markets, therefore, may have to rely on the emergence of a more progressive voting bloc in Congress, one willing to pressure the next president not only to reregulate the financial markets, but also to invest aggressively in public works, such as clean energy, in order to address what is likely to become a growing demand to staunch unemployment.

Given Obama's ties to Wall Street and his relatively modest call for investment in clean energy development -- $50 billion a year over the next decade -- it may take considerable mettle from an emboldened Progressive Caucus to achieve these objectives, as it will mean challenging the "pay-go" spending dogma embraced by the House leadership.

So, the election next Tuesday will only be the first round in a struggle to force the proprietors of Wall Street's Deadwood to surrender their choke hold on the nation's economy and put the public purse back in the hands of our elected representatives.

For "the change we need" to be realized, that struggle may have to play out within the ranks of the Democrats.