Democrats Show Some Backbone on Wall Street Reform

The political battle over Wall Street reform is finally being engaged in earnest. Senate Minority Leader Mitch McConnell (R-KY) has formally thrown in his party’s lot with the nation’s largest banks, and to their credit, Democrats appear to be pushing back, both on politics and policy.

McConnell has been arguing this week that the reform bill would make the bailouts of 2008 a permanent public policy. This is simply wrong. There are plenty of shortcomings in the bill that the Senate Banking Committee recently approved (Nomi Prins lays out most of them here), but it is not a permanent bailout authority. It is a serious, if somewhat underwhelming, effort to place meaningful regulations on out-of-control banks, and find a way to destroy them safely when they fail.

So it was heartening to see Senate Banking Committee Chairman Chris Dodd (D-CT) push back against McConnell’s misinformation campaign yesterday, rather than cede rhetorical territory to mollify him. Here’s how Dodd (accuartely) characterized McConnell’s argument on the Senate floor:

“It’s straight from the Wall Street special interest playbook. And it’s just a Wall Street lie.”

Here’s how McConnell’s hometown paper, the Lexington Herald-Leader described the Minority Leader’s bloviating:

“While the intricacies of financial regulation are complicated, McConnell’s calculus is pretty obvious. The high-stakes gamblers on Wall Street, luxuriating again in big bonuses, don’t want any new oversight or regulation. Why would they, knowing that the government would have to bail them out again if their trading of worthless financial instruments goes bust and threatens to bring on the next Great Depression? McConnell, unabashedly courting Wall Street bankers for political money, is happy to scratch their backs if they’ll scratch his.”

And it appears that at least a few Republicans understand the political imperative to vote for reform. Standing with Wall Street against the public is not going to fly with voters of any ideological stripe come November. While Republicans officially continue to stand in unified opposition to the bill, Sen. Bob Corker (R-TN) called McConnell’s comments “overblown,” and Sen. Olympia Snowe (R-ME) offered support for a proposal on derivatives reform outlined by Sen. Blanche Lincoln (D-AR). The devil will certainly be in the details, but Lincoln appears to be pushing a robust reform that would curb the reckless excess that toppled AIG.

The bill still needs to be strengthened significantly. Fortunately, the criticisms Prins levies against the Dodd bill can be countered with with a handful of short amendments (indeed, if Lincoln’s legilsative text matches her descriptions, she will have provided one of those key changes). The lobbying against those amendments is going to be relentless, but it’s good to see Democrats pushing back against Wall Street’s defenders, rather than rushing headlong into destructive compromises that jeopardize our economy. It will take backbone, but Democrats do in fact have the opportunity to accomplish something significant.

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