As the battle of the bedpans drags on, consuming what little is left of the short attention span of the Congress, Democrats are taking up financial reform.
Representative Barney Frank is responsible for legislation in the House and Senator Christopher Dodd in the Senate.
Neither of them is exactly presenting a profile in courage. Frank has virtually lifetime tenure in the House. Fall-out from arrests of a callboy network being run out of his Washington apartment in 1990 triggered his only electoral close call. Seventeen consecutive congressional election victories have enabled him to amass a lot of political clout and his role as the Democrats’ pivot person on financial reform has made him a leading recipient of campaign contributions. The Boston Globe (October 23) reported that Frank had raised $1.2 million thus far this year, even though the next election is still a year away. He is likely to double his total and pick up a bit more over the next 11 months.
Barney Frank is often called the smartest member of the House, something he has not cared to deny. He is apparently so smart that he thinks he can outsmart the financial and insurance companies that account for his campaign largesse by taking their money and giving nothing back in return. “I’m casting the same votes I was casting 20 years ago,” Frank tells the Globe. He stopped taking money from the top ten banks that took government money beginning last fall, and he will be giving $500,000 of his stash to the House Democratic campaign fund.
As smart as Barney Frank may be, he appears to lack common sense, for he must be the last person in America to believe in a free lunch. Who is the greater fool, his corporate campaign donors, who believe they are getting something for their money, or those of us Frank asks to believe that the contributions don’t figure in his votes and those of the rest of the House Democratic Party for whom he plays Santa Claus?
Consumer and financial reform groups refuse to be fooled. They have criticized Frank’s reform proposals and his amendments in committee as give-aways for the very banks and financial firms that triggered our current crisis. Frank has come under fire for writing loopholes into a bill regulating derivatives trading, and has found himself in the embarrassing position of being shocked, simply shocked by the “blatant” credit card rate-jacking done by the major banks during the grace period they were given by him and the rest of the Congress before a credit card “reform” law was to take effect. (The Boston Globe, November 6, 2009) Frank also supported exempting “general retailers, auto dealers, title insurers, accountants, lawyers, and others,” notes the Globe, November 5, 2009), from regulation by the proposed consumer financial protection agency. Most banks save a handful of the biggest have slipped the net as well.
Meanwhile, in the Senate, imminent electoral defeat, it seems, concentrates the mind. Senator Dodd got caught changing an executive compensation bill earlier this year to protect executive bonuses at AIG, the recipient of a $165 billion (and counting) bailout from the federal government, and one of Dodd’s biggest campaign contributors. This came on the heels of having been caught receiving so-called “Friend of Angelo Mozilo VIP” mortgage loans from Countrywide Financial, a mortgage house saved from bankruptcy via a shot-gun marriage with Bank of America, a coupling that created a deeper hole for government aid to fill as B of A headed down.
Dodd, a 29-year veteran of the Senate, seeks redemption through rectification. His financial reform bill unveiled last week outflanks Frank’s bill by plenty. It seeks to strip the Federal Reserve of regulatory power and creates a single super-regulatory agency with powers to force break-ups if necessary of firms that violate fair lending and business practices. While the Obama Administration only wants to “change the perception” that some institutions are too big to fail, a soporific notion with no statutory bite whatsoever, Dodd’s bill would empower the proposed agency to break up firms upon on the basis of size alone if it is deemed necessary for the public good. Dodd’s bill is probably less a reflection of his beliefs or of his vote-counting skills in the Senate than of desperate game of political misdirection.
It is perhaps the genius – or perhaps the perverse genius — of American politics, as Richard Hofstadter noted a generation ago, that our system survives on such a small diet of principle. As Frank appeases big capital and tries to protect the Democratic Party from an all-out war with Wall Street, and Dodd goes to war with big capital to salvage his political career, they reveal how compromised their efforts and those of the Democratic Party in reforming our predatory financial sector are. They join with an Administration convinced of the power of the carrot over the stick and of the good will of a financial sector that has returned once more to inventing the next great financial crisis.
The combined opportunism of the Democratic Executive and Congressional branches not only weakens their party and the prospects for national reform. It hastens a day of reckoning for a political regime growing more feckless and enfeebled by the day.