The financial reform bill that passed both houses of Congress was far less than we needed. But it was a start -- enough of a start that the bankers have spent tens of millions trying to kill it. And now, with the House-Senate conference version of the bill coming back to Senate for final approval, the reform is in jeopardy yet again.
On May 29, the bill passed the Senate, 59-39, just enough to block a filibuster. Four Republicans voted in support and two progressive Democrats voted no to protest its weaknesses. But the banking lobby has used the Congressional recess to work the four Senate Republicans.
And, sure enough, three of the four Republican supporters have gone wobbly. Olympia Snowe of Maine voted for the Senate bill, but is now making equivocal noises about whether she'll support the conference bill (which is weaker in some respects than the Senate's version.) Likewise Chuck Grassley of Iowa.
The always wily Scott Brown of Massachusetts threatened to withhold his vote until the House and Senate leaders agreed to scrap a $19 billion tax on large banks. He voted for the senate bill, but now Brown is warning that he may vote against the final bill anyway. Apparently there is no honor among thieves. The financial industry was the largest donor to Brown's Senate campaign.
Among Republicans, only Susan Collins of Maine is standing firm in her support. The fewer Republicans who are still officially committed to the bill, the easier it is for the banking lobby and the GOP leadership to intimidate or seduce others.
Among the Democrats, Wisconsin's Russ Feingold, suddenly in a tight re-election race against a self-financed Tea Party millionaire, has vowed to vote against the bill because it's not tough enough. It's not clear how that will persuade the Tea Party crowd, who don't much like Wall Street either.
In an anti-incumbent year it seems a little perverse to vote down the only piece of legislation that partly leashes banks. (If you think the bill is not a step forward, ask the bankers' lobby why they are working so hard to kill it. C'mon, Russ, if it's good enough for Bernie Sanders, it should be good enough for you.)
Sen. Maria Cantwell of Washington State, even more than Feingold, was a true hero in the fight to get the strongest possible bill. She cast a protest no vote when the bill was before the Senate, but with the bill hanging in the balance, unlike Feingold she will vote for final passage.
Two weeks ago, Democratic head counters thought they had maybe one vote to spare. But Robert Byrd's death June 28th deprived supporters of that extra margin.
Passage may depend on the vagaries of West Virginia politics. West Virginia Governor Joe Manchin has delayed making an interim appointment for Byrd's seat, pending a final decision on whether the vote to fill the seat is to be held as a special election in 2010 or in 2012 when Byrd's term expires. Manchin wants to run for the seat, but has ruled out appointing himself to fill the vacancy. The White House has been urging Manchin to stop dithering and name Byrd's interim replacement as soon as possible.
At this writing, Democratic Senate Leader Harry Reid has put off calling up the conference bill for a vote pending a better head count. That's how razor thin the margin is.
But with every passing day, the risk increases that Wall Street and the Republicans will kill more than a year's legislative work. A defeat of this bill would mean that all of the carefully negotiated compromises are up for grabs. With Democrats expected to lose seats in November, anything that managed to pass would be even weaker.
This nail-biting finale is like the end-game of the health reform bill all over again, but with one key difference. In that fight, President Obama belatedly got personally engaged, working the phones and twisting arms, LBJ-style -- far from his usual hands-off approach. This time, there are no arms to twist. The undecided votes are all Republicans, with whom Obama has no leverage. And with Russ Feingold in the posture of distancing himself from Washington, D.C., the White House has little influence with him either.
But Obama could be taking his case to the country. In the past few days, Obama has sounded more like a partisan and has gotten off some good one-liners, but has mentioned the stakes of financial reform only in passing. That's a pity, especially with Republicans using the October 2008 vote in favor of the bank bailout (TARP) to whack Democratic incumbents.
This reform bill may be a day late and a dollar short. But starting the process of reining in the banks is the antidote to the bailout and to future bailouts -- both politically and in terms of better policy. And it's Republicans and Wall Streeters who are trying to kill it. That's not so hard to explain. The president should be using his bully pulpit to shame the banking lobby and its Republican toadies, and to associate himself and the Democrats with stronger housecleaning.
If the final bill does manage to squeak through, this is only the beginning of reform. Several key provisions, such as the Volcker Rule separating commercial banking from trading and investment banking and the rules on derivatives, were seriously weakened by amendments. Others, such as the rules on capital requirements, too-big-to-fail, and consumer protection, leave a lot to agency discretion. So the same agencies that are far too close to the bankers, the ones that let this disaster happen, will be in charge of the details of reform.
As the bill has been weakened, bank stocks have been going up. The lead front page story in Sunday's New York Times reported that Wall Street is hiring again. The sector that crashed the economy, and that needs to be drastically reined in, is back in metastatic growth mode. And evidently the bankers have confidence that their chums at the Treasury and the Fed are not going to rain on their parade, reform bill or no.
So we need this bill, but only as a first step. Even more importantly, we need a citizens' campaign to monitor how it is carried out and where the holes are.
The bankers' lobby is at work, night and day, to weaken this reform legislatively and in its implementation, orchestrating grassroots lobbying by local banks and coordinating it with campaign contributions. The counterweights on the progressive side are no match.
One of the few effective official watchdogs, the Congressional Oversight Panel chaired by Elizabeth Warren, may be shut down early as the TARP ends. Americans for Financial Reform, which did heroic work as a coalition of more than 200 consumer and labor groups in pressing for the strongest possible legislation, will close up shop at the end of the summer for lack of funding. If anything, AFR needs to be expanded, so that it can continue to be a citizens' watchdog.
Two years and counting into the most severe financial collapse in nearly a century, bankers still rule. Republicans protect bankers from reform, yet amazingly masquerade as the party of populist backlash. If Democrats let the right play this double game, shame on them. It's only possible because too many Democrats are too cozy with the same bankers.
UPDATE: Late Monday, the offices of Republican senators Scott Brown and Olympia Snowe issued statements indicating that they will vote for the financial reform bill, bringing the number of supporters to 60, just enough to break a Republican filibuster.
Robert Kuttner is author of A Presidency in Peril, co-editor of The American Prospect, and a senior fellow at Demos.