The Storm this Time: The Financial Reform Bill
Another Partisan Showdown Brews over the Financial Reform Bill
Just as was the case with the health care reform imbroglio, it looks like we are, yet again, back to school yard politics in a gallingly kindergartenesque, albeit infantile, form in the US Senate; this time, its financial regulation reform.
With a version of the bill already all the way through the House of Representatives and the Senate version out of the Senate Banking Committee, Democrats are angling to bring the issue up for a floor debate while Republicans are united in their opposition to the bill as currently written and even threatening a filibuster.
Both sides anchor their positions with the claim that they are committed to instituting a public bailout-proof plan that would head off the kind of financial meltdown that precipitated the near collapse of the global economic system not long ago.
The Senate bill has provision for a consumer protection bureau housed within the Federal Reserve that would fulfill regulatory functions currently served by more than a half dozen federal regulators.
This provision was actually one of several compromises that Senate Democrats signed on for to appease anti-watchdog Senate Republicans. But it falls short of the stand-alone, independent watchdog agency with enhanced oversight powers that President Obama originally proposed and which the House Democratic leadership managed to retain in the house version of the bill.
The Senate bill also establishes a $50-billion fund, to be sourced by large private firms, which would finance the “orderly liquidation” of distressed financial institutions.
This particular provision has of late, gotten a bit of media attention. The Democrats contend that the fund is needed to ensure that public funds are not utilized to bail out large firms that are too big to fail.
On the contrary, Republicans are insistent that, by its very existence, the fund represents a perpetuation of the current bailout paradigm. They lavished astounding amounts of air time on the news magazine circuit this past weekend espousing the largely incomprehensible view that having financial institutions pay into what basically amounts to a private insurance policy against the use of tax-payer dollars to shore-up or dismantle insolvent banks and insurance companies is tantamount to a government bailout!
Republican Senators are even increasingly calling for the bill to be abandoned altogether. As was the case with the health reform bill, they are asking for a re-set; for the version of the bill currently being politically litigated to be scratched.
Unfortunate as it seems, the Republican strategy appears to be working. Some Senate Democrats are seriously contemplating striking the $50-billion fund provision that appears to be causing Republicans the most heartburn. Proponents of this position argue that beyond being a gesture of goodwill, this would be a sure way of seeing how truly committed Republicans are to negotiating in good faith.
I must say that Democrats seem quite oblivious of the hard lessons from the just-concluded health reform embarrassment. They are foolishly heading down the same perilous corridor. Watering down the financial reform bill or any key aspect of their legislative agenda for that matter to mollify Republicans or garner Republican votes is an exercise in futility.
Republicans are clearly gambling that continuing, as they have done up to this point, to operate as the party of “no” is the only clear path to victory in November. They believe that this slash and burn line of attack resonates with the voters.
Democrats should take faith in the mandate that the American citizenry extended them in the November 2008 elections and truly single-mindedly execute the key initiatives of their platform. Americans deserve a financial reform bill that, at a minimum, should curb the excesses that precipitated the last economic meltdown and protect consumers from the predatory practices of the banking and insurance industries. Doing any less amounts to a unfathomable dereliction of duty.