22
May
10

sweeping reform, or sweeping reform under the carpet?

don’t believe the hype, though it might not be quite that bad

After 9 months of hard fighting, yesterday financial reform came down to this: an amendment, proposed by Senators Jeff Merkley and Carl Levin that would have forced big banks to get rid of their speculative proprietary trading activities (i.e., a relatively strong version of the Volcker Rule.)

The amendment had picked up a great deal of support in recent weeks, partly because of unflagging support from Paul Volcker and partly because of the broader debate around the Brown-Kaufman amendment (which would have forced the biggest 6 banks to become smaller). Brown-Kaufman failed, 33-61, but it demonstrated that a growing number of senators were willing to confront the power of our biggest and worst banks.

Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote. Why?

Partly this was because of procedural maneuvers. Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote. Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.

Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership – and from the White House. Again, the long reach of Wall Street was at work.

But the important point here is quite different. If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated. That would have been a clear victory for the status quo.

But Merkley-Levin had momentum and could potentially have passed – reflecting a big change of opinion within the Senate (and more broadly around the country). The big banks were forced into overdrive to stop it. [link 2]

No sooner was the Senate vote conducted, than a media barrage was unleashed, hailing the legislation as an epic achievement. The language used by the television networks, news services and major daily newspapers was so uniform that it suggests prearrangement.

The legislation was “a sweeping Wall Street reform bill” (Reuters), “the most sweeping overhaul of financial regulations since the Great Depression” (ABC), “the most sweeping changes in government regulation of the nation’s financial institutions since the Great Depression” (McClatchy), “the most sweeping rewrite of financial rules since the Great Depression” (Los Angeles Times), “the most extensive overhaul of financial-sector regulation since the 1930s” (Wall Street Journal), “the most sweeping regulatory overhaul since the aftermath of the Great Depression” (New York Times) and “the most profound remaking of financial regulations since the Great Depression” (Washington Post).

None of these corporate news outlets have bothered to explain why Wall Street reacted to the passage of this supposed landmark legislation with comparative indifference. [link 1]

there’s a long way to go. . .

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