As I've written previously, The Nation is a community defined by spirited--often fractious--debate. But when it comes to what we're taking away from the Democratic loss in Massachusetts, it's safe to say there is a consensus of sorts emerging: moving forward, Democrats need to show they are on the side of working people every step of the way. (Read Greider, Nichols, and me.)
The Obama Administration's proposed bank tax was a start, though it should be larger and also extend to a windfall tax on excessive bonuses. But raising $117 billion from the Too Big To Fail financial institutions which brought us this economic meltdown is a good and smart step down the populist path Democrats should have stayed true to post-2008.
And today, a bolder proposal from the Administration--much overdue--to limit the size of banks and their ability to take people's deposits and engage in casino-like investment banking. The New York Times reports that the regulation targets the Big Five--Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, and Goldman Sachs. There are indications this is a move towards restoring the kind of protective firewalls enacted through Glass-Steagall following the Great Depression.
The Administration will have to prove that it is truly ready to fight for these reforms--not go all timid on us as it did with the public option and financial reform to this point. And other critical financial reforms must also be pushed--reforms that will not only resonate with voters but also prevent a repeat of this economic crash--beginning with a robust Consumer Financial Protection Agency.
By all accounts the CFPA is on the chopping block in the Senate financial reform bill. As I draft this, the Chamber of Commerce is on the Hill with its army of lobbyists, convincing so-called "moderates" that the American people don't need an agency devoted to protecting us from complex, toxic financial instruments; that somehow the regulators and the TBTF institutions (which are now even bigger than they were pre-meltdown) have learned the lessons they need to learn, all is healed, all will be well.
This is hogwash.
For a savvy and far more candid take on what's at stake, check out what Harvard law professor and Chair of the bank bailout oversight panel, Elizabeth Warren, had to say in a recent letter: "We have all worked hard to make the CFPA into a reality, and the next few weeks will determine whether our hard work will make a difference for families or whether families will lose once again. The next few weeks will determine whether families will have to play by rules written by the banks and for the banks--rules that let the industry get away with anything. In my view, we cannot let families lose again."
Warren appeals to people to get involved now at the grassroots to help in this "David v. Goliath fight" for a CFPA. (Kudos to Warren for her continuous smart, clear, humane, folksy, tough stand against forces which would gladly roll over to do the bankers' bidding. As I argue in today's Wall Street Journal, the White House economic team--including the Wall Street-marinated Lawrence Summers and Timothy Geithner--should be jettisoned for their timid response to the crisis of unemployment and Wall Street's obscene excesses. They should be replaced with the tougher, smarter Warren and FDIC Chairman Sheila Bair.)
And the fights won't end there, either--not if we want to prevent the next meltdown.
Former Labor Secretary Robert Reich writes that "the House [financial reform] bill creates regulatory loopholes big enough for bankers to drive their Ferraris through." Bair testified at the Financial Crisis Inquiry Commission hearing last week that the credit-default swaps (CDS) market still poses a systemic threat and that even she can't access the information she needs as Chair of the FDIC. The foreclosure crisis grows while banks still refuse to modify loans and their lobbyists block bankruptcy reform. Too Big To Fail Institutions have only grown bigger and more reckless with the knowledge that our government will bail them out come the next crisis--will the new Administration proposal truly address the danger posed by these banks' size and their trading activities? As economist Simon Johnson puts it, "Are the proposed limits on the total size (e.g., assets) of banks, or just on part of their operations-such as proprietary trading? The limits need to be on everything that banks do, if they are to be meaningful at all. This is not a moment for technocratic niceties; the banks must be reined in, simply and directly."
These are the fights--or more likely knock-down, drag-out brawls--that lie ahead. The Obama Administration can either stand up and lead--rediscovering the message of authentic change Obama ran on--or conduct business as usual. The choice it makes will determine whether the Democrats are revitalized or the defeat in Massachusetts is an ominous sign of worse to come in the 2010 elections.
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