Enjoy the health care debate? Wait until the Senate takes on the big banks. It already looks like déjà vu all over again. Democrats, bloodied from self-inflicted wounds in the health care debate, may well commit seppuku over financial reform.
The script is in place for a failed sequel. The administration, via Treasury, cobbled together a reform plan that was weaker than it should be. The banks signed up every ambulatory lobbyist in town to gut the central reforms. The House fended off Rep. Melissa Bean's attempt to be the Joe Lieberman of financial reform, but ended up passing a bill even weaker than the administration's proposal — with nary a Republican vote.
And so to the Senate. Senate Finance Committee Chair Christopher Dodd put out a remarkably strong reform measure. The bank lobby made it clear that was a non-starter, so Dodd decided to begin a "bipartisan" process in the Finance Committee — think Max Baucus redux — searching for the elusive Republican moderate. Meanwhile Blue Dog and New Dem Democrats — Bayh, Warner, Bennet and others - are openly casting about for ways to weaken the proposed agency to protect consumers from bank gouging. And we have yet to hear from Sen. Joe Lieberman, still focused on torpedoing health care, who no doubt will weigh in with his inimitable combination of pious corruption and treacherous venom.
The White House has signaled that the president is prepared to let the bipartisan process play itself out. Of course, the president would prefer a strong bill, and will oppose anything that is too weak. But the White House has a big stake in passing any bill labeled comprehensive financial reform. Sound familiar? Don't slit your wrists — the holiday break is coming.
During the break, the White House and Senate might review the debacle known as health care reform, and consider a different strategy. Why spend weeks or months pursuing Republicans, when they are committed to a strategy of obstruction that appears to be working for them, if not the country? Why give the bank lobby a free pass to buy up the handful of Blue Dogs and New Dems to cripple reforms? Why let sanctimonious old Joe gleefully line his campaign pockets while sticking it to liberals another time? Why not call their bluff?
Voters are furious at a bailout that has provided the bankers that ran the economy off the cliff with record bonuses, while millions remain unemployed. Their fury is stoked as bankers gouge them with credit card and overdraft fees, obscene interest rates, and whatever else they can invent to soak their customers. Americans aren't interested in an incomprehensible debate about clearinghouses for derivatives. We want heads to roll. We don't want regulation; we want shackles on bankers so they don't screw us again. And every poll shows that anger goes across party, race, region and religion.
The White House and Democrats find themselves a target of this fury. By appointing Tim Geithner as Treasury Secretary and reappointing Ben Bernanke as head of the Fed, the administration signed onto the Bush bailout of the banks. Republicans successfully conflated the recovery plan with the bailout, and now gleefully blame Obama for running up deficits without producing jobs. So the White House and the Senate leadership have every reason to change the game.
Why not put forth a strong bill built around simple principles? We will protect consumers from being gouged by big banks. We will insure that no bank is too big to fail, and force each to create "living wills" to prove it. We will shut down the backroom gambling in derivatives and exotica that caused the crash. And we'll tax the big banks to pay for the costs.
Then rally 50-55 Democratic Senators, representing 80 percent of the country's population, to support the bill. Hold a public event and draw the damn line. You are either with this or with the banking lobby. Bring it to the floor. Challenge the Republicans and the New Dems and the montebanks to filibuster against it. Force a vote on cloture. Name names. Who stands with Americans and who stands with the big banks? Force a vote regularly going into the electoral campaign.
Republicans will argue that new regulations will cost jobs and represent government takeover of finance. New Dems will argue that the reforms go too far, and will hurt the recovery. Joe Lieberman will discover that it is immoral to pick on big banks.
Progressives will produce demonstrations in every home office of every Senator standing in the way that will make the tea-bagger demos look like, well, tea parties. Let unemployed workers, middle-class families worried about losing their homes, young people who just got socked with credit card fees and interest rate hikes, and more get word that their senator stands against holding the banks accountable and protecting consumers. We'll expose the lobbyists, the money, the campaign contributions, the wives, cousins, sons and daughters on the bank payrolls. The legislators may just discover that the bank money is toxic, and standing with the banks perilous to their political careers.
If financial reform is a backroom policy debate about arcane financial instruments, it will inevitably be dominated by the banking lobby and the experts and legislators that the banks can easily afford to rent. If there are clear lines, the question is which side are you on. Will Republicans stand with the banks? Nothing could be better for reviving Democratic electoral prospects. Will New Democrats stand in the way? I doubt they are that purblind — but they will pay a very big price if they do. I suspect the best road to gaining Democratic unity and bipartisan support isn't compromise in the cloakrooms but challenge in the streets.
This would best be led by the President with his bully pulpit. Populism is not the natural patois of this elegant and eloquent leader. He prefers reason and compromise. But that didn't work out so well with health care, and the bank lobby makes Big Phrma look shabby. The president tried out his inner populist on "60 Minutes" last Sunday, saying that he did "not run for office to be helping out a bunch of fat cat bankers." Then three of those "fat cat bankers" stiffed him on Monday, failing to show up when summoned to the White House. Their message is clear. They are headed back to business as usual. Isn't it time for the President and the Senate leadership to send them a clear message back?
This isn't a game. The banks must be curbed if we are to build a new economy that works for most Americans. As finance was deregulated beginning with Reagan, we've experienced a series of financial crises — with ever-greater frequency and severity. Now the big banks are emerging more concentrated than ever, with an explicit promise that they are too big to fail, meaning that they are free to gamble with taxpayers standing by to cover their losses.
This is a poisonous stew. We simply can't afford to let the banks dilute the reforms, or let those too conservative or too corrupt to stand in the way. Make the stakes clear. Take the debate out of the back rooms. Draw the damn line.
