Harry Reid got it right when he said that the GOP is "making love to Wall Street" - and when politicians and bankers "make love" it's the public that gets screwed. Sen. Shelby's so-called "consumer protection amendment" failed, as expected.(1) But what happens next? Progressives have captured the public mood and are changing the dynamic in Washington. It's time to capitalize on the momentum and press for the best reform possible.
Progressives, take a bow. Then keep on fighting.
Pity those poor bankers and politicians: The candles are lit, the wine has been poured, and Barry White is crooning in the background. But circumstances are making it difficult to consummate the relationship this time. In Sen. Reid's words, Republicans "are having difficulty determining how they're going to continue" their torrid affair with their banker/lovers. Here's their problem: While the tune may still be "Never Gonna Give You Up," the lyrics don't work anymore. The ideology of deregulation and false free markets doesn't create a tingle now that events have completely discredited it. That's why bank lobbyists and their political hirelings have been forced to resort to phony measures like the Shelby "consumer protection" amendment. When ideology fails, the only thing left is deception.
How bad and phony was the Shelby amendment? It was a Potemkin policy, a measure which claims to protect consumers but actually does the exact opposite. Here's what the AARP said about it in its letter of opposition: "The consumer protection agency will not be independent ... (it provides) inadequate resources ... oversight and enforcement is extremely limited ... and, the bill does not give states the authority to take action where necessary." As Sen. Dodd more succinctly put it, "It's like they want to create a police department that's only allowed to enforce laws against littering," adding: "It's like a stimulus package for scam artists."
The President also came out forcefully against Shelby's amendment. In a statement released today, he said that it "will gut consumer protections and is worse than the status quo. I will not allow amendments like this one written by Wall Street's lobbyists to pass for reform." The statement went on to say that it would "significantly weaken consumer protection oversight, includes dangerous carve outs for payday lenders, debt collectors, and other financial services operations, and hurts the ability of community and local banks to compete by creating an unlevel playing field with their non-bank competitors."
The President and Congressional Democrats deserve praise for standing up to the bank lobby and calling out this Shelby amendment for what it is: a Wall Street sting operation. But they're not acting in a vacuum. A free-form coalition of committed reformers has created enormous pressure to provide more than superficial change. Activists outside government and progressive leaders on the Hill have joined forces with impressive results. The New York Times, for example, details the success that progressives in the Senate have had in changing the narrative on reform (although, as Yves Smith points out, their use of the now rarely-used term "liberal" in place of "progressive" seems to have a taunting or deprecating quality).
There are tectonic forces at work in the political debate here, and the politicians that recognize them won't just have the satisfaction of offering better policies. They'll also be amply rewarded at the ballot box, according to the polls. Raw Story cites an intriguing Pew Research finding (also noted by Smith) that Americans have more positive feelings about the term "progressive" than they do about "capitalism." (They also have more positive feelings about "civil liberties" and "civil rights," as well as the more right-wing idea of "states rights" - which suggests Congress should stay away from pre-empting states' ability to provide consumers with financial protection.)
What happens next? The President's statement said that "the bill before the Senate ... includes the strongest consumer protections ever" - but it's not clear exactly how strong those protections will be. The current draft legislation places the consumer protection function within the Federal Reserve, and not as the stand-alone agency originally proposed. Democrats ... and like-minded Republicans ... should push for an independent Consumer Financial Protection Agency, and not the more diluted version agreed upon in negotiations. Sen. Jack Reed's amendment is effective on this score and should be brought to a floor vote soon, to capitalize on the momentum gained by the (presumed) defeat of Shelby's faux reform.
A few short weeks ago it looked like an independent Consumer Financial Protection Agency could become the "public option" of financial reform -- proposed by Democrats only to be traded away with a wink and a nod. Progressives in the Senate and elsewhere deserve enormous credit for changing the narrative and the public's mood. It's working. They should keep up the pressure, press the advantage, and keep pushing for the most effective reforms possible - in consumer protection and all other areas of this bill.
(1) This post has been updated to reflect the defeat of the Shelby Amendment, which was anticipated at the time it was originally written.
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 "firstname.lastname@example.org."
Website: Eskow and Associates