A surprising message from Tim Geithner: Turn up the heat on financial reform
Now that healthcare is done, what’s next? The most obvious suspect: financial reform. Mark Ambinder says getting a bill passed should be an “easy political victory.” The New York Times suggests that Republicans are willing to cut a deal. And in a surprise move, on Monday the Senate Banking Committee voted, on a strictly partisan 13-10 vote, to pass the bill out of committee and send it straight to the Senate floor. In a statement, President Obama applauded the move, declaring that “we are one step closer to passing real financial reform.”
So we’re moving right along?
Not quite. There’s been plenty of inside-baseball speculation as to whether the GOP decision to let the bill pass out of committee without proposing any amendments is a sign of internal dissension, or just recognition that nothing was going to get past the committee’s Democratic majority, so why bother. But that’s not material to the larger issue. To get to 60 votes in the Senate, at least one Republican will have to vote for the bill, and there are only two scenarios under which that can happen. Either a deal is made that further undermines a bill that most serious advocates of regulatory reform already consider too weak, or the Obama administration puts enough pressure on the GOP to get someone to break ranks.
Given the Republican intransigence on healthcare reform, the possibility of a GOP defection would appear to be infinitesimal. But the Obama administration is in a much stronger position on financial regulatory reform than it was on healthcare. In part this is simply because winning the battle on healthcare reform created some much needed momentum, but it’s also because financial reform is a much less divisive issue. Nearly everyone, on both parties, agrees that something must be done. And something will be done.
The Obama administration is already signaling that it is ready to turn up the pressure. Let’s turn the mike over to a senior administration official, speaking on Monday about the prospects for getting a reform bill passed in the Senate.
I urge everyone to watch this process closely, for it will be a test of our capacity as a nation to deal with complex and consequential problems. When you see amendments designed to weaken the basic protections of reform; when you see amendments to exempt certain types of financial firms or financial instruments from rules; ask why we should be protecting those private interests at the expense of the public interest.
Who was this wise man uttering such sage counsel? None other than Treasury Secretary Timothy Geithner, who ventured into the belly of the anti-regulation beast, the American Enterprise Institute, on Monday, and gave what was undoubtedly his fiercest speech ever on the topic of financial regulation.
Even one of the Geithner’s most relentless critics, Simon Johnson, acknowledged that it was a “good” speech with lots of “good lines.” Of course Johnson then went on to note that Geithner’s recommendation for a resolution authority to deal with the “too big to fail” problem was toothless, and observed that he made no reference at all to the so-called Volcker rule designed to prevent regulating banks from making risky bets with taxpayer-insured money. Sure — even a fierce Geithner does not necessarily put the fear of god into Wall Street.
But whatever — as in every piece of legislation that the Obama administration is fighting to get through Congress, the question is not “how perfect can we make this bill,” but instead, “how much can we prevent this bill from being sabotaged by obstructionists?” And in that sense, Geithner’s speech, coming the same day the Dodd bill was bumped up to the Senate floor, may be politically significant.
The moment is ripe for the Obama administration, and the platform is perfect. If the administration can frame Republican resistance to a tough financial reform bill as a continuation of the same obstructionism that the GOP demonstrated during healthcare reform, Sens. Shelby et al. are going to find themselves in a tight spot. The country is still furious at Wall Street. Wall Street’s lobbyists, as Geithner noted in his speech, are spending a million dollars a day to influence reform legislation.
Geithner just asked “everyone” to watch the process. We’ll do our part, but it is critical that the administration take the lead. Obama made a good case for healthcare when he got out of the White House and started taking his message to the people. Now it’s time to put financial reform front and center. If Sen. Shelby proposes a bogus amendment, the White House needs to call it out — and then, do more than just “ask” why special interests are being protected.
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After thirty years in which the principle that markets know best ruled economic policy-making in the United States, the great financial crisis of 2007-2008 brought the deregulatory era to a shrieking halt. The challenge now facing lawmakers and the Obama administration is whether they can craft a new set of rules that will prevent an out-of-control Wall Street from dragging the entire global economy into the gutter once again.
But expectations for bank reform are low. The proposals being debated in Congress don't do enough to solve the problem of too-big-to-fail financial institutions, or to protect consumers. Even worse, to gain enough Republican votes to guarantee passage, Democrats will likely make compromises that further weaken the bill. Despite the greatest financial crisis in more than 70 years, the U.S. government still doesn't have much appetite for meaningful reform.
See also: Bank Bailouts, Ben Bernanke, Goldman Sachs, Mortgage Crisis, Timothy Geithner, U.S. Economy, Wall Street
of rules that will prevent an out-of-control Wall Street from dragging the entire global economy into the gutter once again.