Protecting Wall Street
From accountability and reform
By Sherman DeBrosse / The Rag Blog / April 21, 2010
We are reading about two firms that sold securities to the unsuspecting public while betting against those same securities in order to line their pockets with ill gotten profits. Then we are told this is not illegal unless they didn’t tell us they were doing it somewhere in the fine print of a prospectus. In such an atmosphere, it should be tough for Republicans to block finance and banking reform.
According to the pundits, the Republicans’ opposition to financial reform — and protection of their Wall Street allies — might cause them problems with their growing Tea Bagger wing that is so angry with the banks.
But not to worry.
The attack on the Dodd Bill
Minority Leader Mitch McConnell and ranking Finance Committee member Richard Shelby approached the microphones wearing the smile of the cats that had swallowed the canaries. We’ve seen it before. In McConnell’s case, the pussy cat smile replaced his usual simper. They were smiling because political genius Frank Luntz had given them another strategy guaranteed to serve special interests while painting the hapless Democrats into another corner.
McConnell announced that the Senate Republicans were opposing the Dodd Bill because it was “another bank bailout.” It was marvelous political and verbal jujitsu because the fact is that the Dodd Bill would reign in Wall Street, and the GOP approach is a sure setup for more bailouts. No wonder they were smiling. It’s tragically funny because it could be another big success for the GOP and another blow to ordinary folks.
Later, one of the Kentuckian’s aides told the press that the minority leader had not seen the rumored Luntz memorandum. Sure! The minority leader ever so deftly (if somewhat indirectly) admitted that he had been huddled with Wall Street bankers plotting ways to derail the Dodd Bill. McConnell said it was just like talking to a few Kentucky bankers and owners of mom and pop stores on Main Street. It was probably just coincidental that, as the deal with the bankers was cemented, money cascaded into the nine most important Republican senate campaigns.
The Dodd Bill provides a process for the orderly dismantling of failed banks, using a $50 billion fund provided by banks — not the federal government. The fund and government supervision are needed to provide for quick, orderly liquidations so that another financial system meltdown can be averted. The amount set to be included in the fund is probably on the low side, and the House bill calls for a healthier amount. The Dodd bill does not provide for government-operated banks; it looks to orderly bankruptcies.
Republicans complain about government “takeovers,” because the term has resonance with so many ill-informed voters. No government takeovers are envisioned in the Senate Finance Committee legislation. Those who follow such things would add that it was all the yammering about “government takeovers” that forced the government in 2008 and 2009 to bail out the banks on their own terms. The Republicans are using a playbook that works all too well.
There is some question if McConnell can keep his 41 troops in lockstep. One called him a “control freak,” and Judd Gregg of New Hampshire admitted the claims that the Dodd Bill is a bailout bill could be “a little over the top.” Nevertheless, Susan Collins of Maine signaled she may stay in line. The “hell no!” strategy will probably help Bob Bennett of Utah and John McCain of Arizona weather tough primary challenges.
Republicans set the scene for more bailouts
The Republican alternative practically guarantees endless bailouts down the road. This has been Republican policy since Ronald Reagan gave Wall Street a huge gift in the form of Brady Bonds.
The GOP alternative scraps the Dodd provisions for orderly bank shutdowns and calls for immediately using ordinary bankruptcy proceedings. There would be no $50 billion emergency fund to cushion the shock to the financial system. Without it, there is the strong probability of meltdowns.
The Republican alternative would also strip away new regulations and the new commission entrusted with looking for signs of financial system breakdown. In other words, the GOP proposal continues deregulation, strips away fail-safe mechanisms, and does not reduce the prospects of another 2008-like financial system collapse.
Here is the key: there is a provision that the federal government can intervene in an “emergency.” Without any substantial new protections in place and no bank-provided rescue fund, the federal government would again be obliged to hand over piles of taxpayer money to the banks and again accept bailout terms dictated by the banks.
The casino-like conditions that prevailed before 2008 exist again, and in fact are even worse. Just look at the huge rewards being given the Wall Street gamblers. Sooner or later, we will be facing another financial system breakdown. The Dodd Bill is very moderate and may not be enough to do more than scale back another catastrophe. The Republican bill, based on the belief that the policies in place in 2008 were essentially correct, would place all of us at great risk.
McConnell is busy getting 41 signatures on a filibuster threat, while others, like Orin Hatch, whine that the Democrats just will not negotiate. The fact is that Senator Dodd spent seven months bargaining with Finance Committee Republicans.
What happened was similar to the health care legislative process. Democrats surrendered one good provision after another in an effort to win a few Republican voters. Senator Charles Grassley of Iowa played the role of the main Republican tease; then, in the end, he denounced the health care plan, and even a clause he wrote, calling it a provision for death panels.
This time, Senator Bob Corker of Tennessee played that role on the Finance Committee, repeatedly assuring the Democrats they were very close to winning a little Republican support. In the end, Dodd got a badly watered down bill and not one Republican vote to report it out of committee.
Tea Bagger power shapes Republican strategy
There was a time when independents punished obstructionism, as well as governing parties that could not produce useful legislation. That was also a time when voters could see through sheer demagoguery and lies. It was a time when they would have been outraged that an attorney general in a northern state — like Pennsylvania — would try to destroy the health care act, using arguments developed by John C. Calhoun to defend slavery. George C. Wallace last used them to prevent school integration in Alabama.
These days hints of violence and secession are not uncommon in Tea Bagger ranks, and it is alarming that their ranks continue to swell. It is not just a small slice of wingnuts that have been activated. Two studies suggest that these people are better educated and more prosperous than the average American. They think too much has been done for the poor, and more of them than in any other group are convinced that Barack Obama was not born in the United States. They talk about smaller government but are determined to hang on to their Social Security and Medicare.
Republican strategists have informed their senators that continued obstruction — and encouragement of fanaticism — will bring the largest harvest in November. It is probably good advice for the Republicans but a poisonous prescription for American democracy.
For three decades, the Republicans have used wedge issues with great success. At first this succeeded in igniting the Religious Right, but soon well-schooled traditional country club Republicans were mouthing the same nonsense. In time they too began to actually believe it. (Days ago, Rupert Murdoch was on television repeating arguments that no intelligent person could hold. Maybe even he has come to believe all the toxic foolishness.)
Then came the “swiftboater” lies that turned around the election of 2004. In 2008, claims about “palling around with terrorists” made some Republican rallies resemble Klan assemblies, and there were threats of violence. It should have been no surprise when extremists showed up at Obama meetings and other gatherings with weapons. Would armed men have been able to get anywhere near George W. Bush or John McCain?
But if these militia types had been asked to leave, millions would have been convinced they would lose their weapons tomorrow. (Of course it didn’t matter, since they rushed to that conclusion anyway.) Then came the “birthers” and now the neo-Confederate “Tenthers.”
It was all part of the degradation of our political process and the infantization of a growing and powerful sector of the electorate. The forces leading to Tea Baggism have been at work for decades, although they accelerated greatly in 2004.
It is unlikely that this extreme form of right-wing populism will diminish anytime soon. For one thing, there is almost no prospect that all the jobs destroyed by George W. Bush’s “great recession” will return, even in a decade’s time. We hear that from sober, moderate economists.
For whatever reason, Republicans, and especially their Tea Bag wing, give Obama no credit for averting a depression or pulling us out of the great recession. Indeed, they blame the lost jobs on him. Tea Baggism is a bit like the Lost Cause mentality that followed the Civil War. People are rushing to embrace the ideas that created their problems in the first place. It’s hard to explain, but it is clearly happening.
Don’t look for the Tea Baggers or independents to check out what is really happening with the GOP and its plan to protect Wall Street. Tea Baggism is about taking back America from urbanites, minorities, and alleged “elites.” It never was about protecting the little guy from the bankers.
Already Representative Marsha Blackburn of Tennessee, a self-anointed Tea Bagger, has joined McConnell in saying the Dodd Bill is another “bailout” and “takeover.” She has rushed to the barricades in defense of poor, beleaguered Wall Street. Look for other Tea Baggers, egged on by Dick Armey, to join her. Of course, those in the mainstream media simply repeat talking points and offer no real analysis or truth-telling as an antidote.
It will be interesting to see if all of the Tea Bag wing of the Republican Party fall into line. Some few like Max Pappas of Freedom Works may not. He has referred to the “Bush Wall Street bailout” and has noted the hypocrisy of mainstream Republicans talking about fiscal responsibility.
Becoming the party of “Hell No!”
It appears that the Republican leadership has decided it is best to go into the November elections as the party of “Hell no!” — following the advice of the ever-eloquent and persuasive Governor Sarah Palin.
Jon Kyl , the second ranking Republican senator, has indicated that there will be a filibuster if President Barrack Obama nominates a Supreme Court justice who opposes letting corporations spend as much as they want on political campaigns.
It is even likely that it will prove impossible to get 67 Senate votes for the new disarmament treaty. Arlen Specter, a former Republican, has already predicted that the treaty cannot be ratified.
Given the present condition of American politics and the state of the electorate, the Republican strategy promises to be highly effective. It is deliciously devilish; the Republicans scuttle effective regulations, save the banks from contributing to a bailout fund, and in turn guarantee endless bailouts without appearing to do so. It will be easy to paint the disarmament treaty as weakening America, and whatever nominee Barack Obama presents for the court can be depicted as too radical, not “mainstream” enough.
What are the Democrats to do?
Only the Supreme Being knows if the Democrats are capable of countering this
Republican jujitsu. Unless they figure out how to frame good counterarguments and learn to stay on message, they could take another big hit.
There is absolutely no evidence that the Democrats have learned anything about message creation and control. We can also expect the Democratic senators to accept damaging amendments from the floor and then be surprised when they garner very little or no Republican support.
The best alternative for the Democrats is to let the Republicans mount a real filibuster against banking and finance reform. Some citizens might actually come to understand that the GOP has become an irresponsible, obstructionist party.
For the moment, Democrats cannot expect to win back many reasonable moderates who will see that health care reform helps them or that Obama pulled us back from the brink of recession. Too much inflammatory rhetoric had gone out unanswered for that.
The best the Democrats can do is expose the Republicans as obstructionists and to sharply define the issues. Every time they speak they must remind voters that a return of the Republicans to power means restoration of the tax cut for the rich and repeal of health care reform.
They should repeatedly remind people how our economy and financial system almost tanked. Most of the lost jobs will not return by 2012. If the GOP regains actual or effective control of Congress, it should be set up for blame when the jobs do not come back in a torrent.
If passage of the Dodd Bill fails after a filibuster, Democrats need to divide the bill into parts and again force votes or filibusters. Reframe the consumer protection section along the lines Elizabeth Warren suggested and force a vote or filibuster.
It is hard to imagine how the GOP could vote against regulating derivatives, but Luntz, the magician, might well pull another rabbit out of his hat.
The biggest problem for Democrats in November 2010 will be reactivating their base. Many loyal Democrats were stunned by the ineptitude of party leaders in 2009 and by all the concessions to Republicans and conservative Democrats.
Given this situation, the Democrats need to change their pusillanimous game plan and start getting combative. Stop making concessions in advance. Even bring up a few improvements to labor law to slow the deterioration of the unions — or at least show they have friends on the Hill. At least add teeth and big fines to anti-collective bargaining practices that are already illegal.
The party might even do something to improve mine safety. They at least need to attach large fines to uncorrected mine safety violations.
Pundits are wed to old ideas, loath to recognize vast changes for the worse in our political process, and absolutely terrified of exposing political lies. Honest columns cost syndication and honest audio commentary reduces television time. The scribes and talking heads are still insisting that independents are likely to punish obstructionists. Maybe, but probably not, this time.
Nothing of the sort can happen as long as the Democrats are wed to the tactics of losers.
[Sherman DeBrosse is a regular contributor to The Rag Blog. A retired history professor, he also blogs at Sherm Says and on DailyKos.]