As the November elections cast their long shadow, Senate Democrats are increasingly challenging Republican opponents on financial issues and move towards politically popular legislation to regulate the markets.
White House press secretary Robert Gibbs quoted President Obama as telling Republicans that he “would not accept bad policy in pursuit of bipartisanship” during the debate set to hit the Senate floor next week.
The current version of the Democrats’ bill, put forward by Sen. Chris Dodd (D-Connecticut), would create a Consumer Protection Financial Bureau to increase financial regulation and restrict banks from proprietary trading or owning hedge funds. It would also require that the president appoint the head of the Federal Reserve Bank of New York. The position is now decided by the bank’s board of directors.
Matthew Rothschild, editor of The Progressive magazine, argues in a blog post that these half-measures don’t have any teeth. Rothschild writes that, under the Senate plan, the Consumer Protection Financial Bureau does not have enough independent power, and that the bill includes no substantial change to the way the Federal Reserve operates, calling into question Congress’s commitment solving the systemic problems brought to light by the financial crisis.
Neither the Senate nor House bill attempts to “[break] up the big banks that are ‘too big to fail,'” Rothschild goes on to say, or “[make] sure that all the derivatives and swaps and arcane instruments the banks have been playing with would now be regulated and neither the House bill nor the Senate bill would reinstate Glass-Steagall, the New Deal law that built a wall between commercial banking and investment banking.”
However, Mary Bottari, the director of the Center for Media and Democracy’s Real Economy Project, said the most important aspects of the bill – the ones that “will set the shape of our economy for the next 50 years” – will be fought through amendments as the measure is debated.
Through the Real Economy Project, Bottari started the online initiative BanksterUsa.org to encourage “progressive net-roots campaigning against the big boys on Wall Street.” She says the making of this financial legislation will be a decisive moment; it is “either going to codify the doom loop of boom and bail, or it can set us on a more sustainable path.”
Sen. Ted Kaufman (D-Delaware) has been one of the most vocal supporters of financial regulation reform, pushing to reimpose the Glass-Steagall Act, while Sen. Sherrod Brown (D-Ohio) has called for action against predatory loans and faulty credit rating agencies, because of which “whole neighborhoods have been hollowed out” in Ohio.
Alan Maass, online editor at Socialistworker.org, said that instead of the Obama administration taking the initiative to change the financial system when anger about the financial collapse was high, there was instead “a series of retreats by the Democrats who control Congress – so what you have now are half measures.”
Maass holds that the best option following the financial collapse would have been to nationalize the banks, and therefore does not have much hope for the reform bill.
“That said, I think the regulations that could be put in place could be much stronger,” he said. “The basic sort of regulations that existed since the Great Depression on banks to protect the funds of depositors have been basically dismantled, and the new financial reform isn’t doing what’s needed to change that.”
Gathering on the National Mall on Tax Day, representatives from groups such as Americans for Financial Reform, Jobs with Justice, Oxfam America and the Center for Economic and Policy Research called on President Obama and Treasury Secretary Timothy Geithner to “embrace a financial speculation tax, an idea whose time has come because it would help curb excessive speculation and raise billions of dollars for critical needs.”
Alison Omens, spokesperson for Working America, a community affiliate of the AFl-CIO, has been working with a grassroots organizing campaign called “I Am Not Your ATM,” targeted at bailed-out banks.
“We are very supportive of financial reform. We think it is absolutely necessary to hold Wall Street accountable,” said Omens, who speaks to around 30,000 people per week across the country about issues affecting working families. “People are angry about what’s happened and the role the big banks played, and are letting CEO’s and Wall Street know they are not going to stand about anymore.”
Another vocal group has been the American Bankers Association, which has called on its members to “let [their] senators know that the legislation in its current form is a bad deal for community banks who were not responsible for the financial meltdown. This bill will impose new costs and regulatory burdens on traditional banks that will make it more difficult for them to serve their communities and make more loans.”
Senate Majority Leader Harry Reid (D-Nevada) and Speaker Nancy Pelosi have painted the Republicans as beholden to big banks, while the Obama administration has stressed the dire consequences of failing to pass a bill, leaving the nation unguarded in case of another financial meltdown.
In opposing the bill, Republicans risk cementing their designation as the party of Wall Street.
Dodd said he expected there would be Republicans who did not have the stomach to vote against the bill. “I don’t think a number of Republicans want to be led by the nose into the pit,” he said.
Sen. Scott Brown (R-Massachusetts), who has voted across party lines on some issues, said he couldn’t support the bill was written. He said Obama was using this reform as a “wedge issue.”
The Democrats have said they plan to have the legislation complete before the November elections. Reid reminded the public, “It’s important the American people realize it’s difficult to work with the Party of No.”
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