Looking Forward to the Debate on Financial Reform

Today the House passed a far-reaching bill to reform the financial industry, a useful and much-needed endeavor.

Out of all the possible things Congress can do, making life tougher for Wall Street probably constitutes a can’t-go wrong effort. One would expect this bill to pass with a soaring bipartisan vote, a pledge of unity that would make everybody – Democrats, Republicans, the president, and the government itself – look good. Who would be against punishing those who initiated the economic crisis?

175 Republicans and 26 conservative Democrats (plus Dennis Kucinich), it turns out.

This opposition is puzzling, to say the least. The reforms, to be fair, probably are not tough enough. A vote against the bill as too weak would constitute a legitimate critique.

The Republicans opposing the bill, however, do not appear to have such grievances. Their complaints, rather, appear to run along two paths.

First, financial reform hurts the banks too much. According to Republicans, “the measure would tighten credit, cost jobs and give the government too much power over private enterprise.” All these constitute consequences of overregulation – “too much power over private enterprise,” for instance, is a common critique of government regulation.

Second, financial reform helps the banks too much. Republicans also complain that “the creation of a new $150 billion fund to dissolve failing businesses would mean a continuation of the bailouts.” Representative Scott Garrett notes, for instance, that “continuing a situation where you have bailouts, continuing a situation where you hurt jobs and expand the authority of government entities…is not the way to do it.”

That in one breathe Mr. Garrett can criticize financial reform as too strong and too weak hints that Republican concerns are not truly philosophical in content. It appears, rather, that Representative Eric Cantor and the Republican caucus made a conscious decision to oppose financial reform, in order to weaken the leader of this country and win congressional elections. They then sought a reason – any reason – to criticize the regulations.  If Democrats took out the “$150 billion fund” (a good, practical idea) Republicans would merely latch onto another aspect of the bill to criticize. Not a single one would change his or her vote.

It constitutes the same strategy Mr. Cantor used with the stimulus; when the president offered a bill with 37% in tax cuts, Mr. Cantor and the Republicans said that a $288 billion tax cut wasn’t good enough. Instead, every single house Republican voted for an alternative package containing almost 100% tax cuts – a proposal probably not meant to be taken seriously.

In the following months, as financial reform becomes a top priority of the administration, Democrats and Republicans will open a debate into the merits of financial reform. Republicans will oppose the bill, hoping to lower support for this nation’s leader. Democrats will do the opposite.

On the surface, Democrats appear to have the stronger case. Reforming Wall Street constitutes a vital necessity; strengthening federal regulations will help prevent another financial crisis (which came about in part due to inadequate regulation). Doing this, moreover, would be an initiative extremely popular with the public.

But Republicans are extremely good at making implausible criticisms sound logical through sheer repetition (this is what Fox News does every night). They are simply better than Democrats at the spin-game, at appealing to emotion and using populist nonsense. They won against Vice President Al Gore and Senator John Kerry, while hobbling President Bill Clinton’s presidency. They were winning against President Barack Obama, until Wall Street imploded. They did damage to the stimulus, to the cap-and-trade bill (a Republican idea, in fact, adapted by Democrats), and to health care reform.

They may do it again to financial reform. How such a politically popular and necessary reform can get derailed seems quite impossible at first glance. But if anybody can do it, the right-wing machine can. One has to admire it, sometimes.

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2 Responses to Looking Forward to the Debate on Financial Reform

  1. Joe from NC says:

    This shows one of the weaknesses of our political system. An out-of-power party has almost no incentive to support anything the majority party wants. If something proposed by the majority party passes and is popular, no matter how many of the minority party vote for it, the majority will get credit for it. Likewise if an upopular bill passes, by opposing it, the minority party will be able to claim that they had the foresight to oppose it.

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