Financial Reform: Reconciliation or Ritual?
February 25, 2010 - 5:15pm ET
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The pheremonic scent of compromise is inducing euphoria in the nation's capitol once again. Not that there's anything wrong with compromise, if it results in policies that work. But we've just pulled ourselves back from the brink of financial meltdown, and tens of millions of households are experiencing their own economic catastrophes. This is no time to value process over outcome. The danger is that the desire to appear bipartisan may prevent us from creating a system that protects us from either collective or individual economic disaster.
The Administration now seems to be signalling its willingness to cave on the two most critical elements of reform: the Volcker Rule and the CFPA. They announced the "Volcker rule" with great fanfare last month, explaining that financial institutions would no longer be able to trade – speculate, really – with their customers’ accounts. This was widely seen as taking power away from Tim Geithner, who’s been softer than Volcker (to say the least) on this issue.
Re Geithner: He’s baaack! Geithner lieutenant Lee Sachs took point yesterday in announcing a virtual rollback of the Volcker rule before it even took effect. The rule will now be optional, at regulators' discretion, said Sachs. Ben Bernanke joined the chorus, too.
The Dodd/Corker deal was the opening salvo is the compromise process -- one which, in this case, appears to lead to a regulatory structure that will be too paralyzed to protect Americans, either individually (CFPA) or collectively (through the Volcker rule). Now the Administration appears to be walking away from the CFPA, too.
This is turning into Health Reform II: The Sequel.
Why compromise? A fairly robust financial reform initiative has passed in the House, so why not use reconciliation in the Senate? It would certainly affect the deficit, so there can be no meaningful procedural objection. On policy grounds, it's beginning to appear that reconciliation's the only way to enact legislation that will really work. On political grounds, why would anyone who wants genuine financial reform be reluctant to force other Senators to vote against strong protections for the beleaguered American consumer?
The alternative may well be more of the empty rhetoric and on-camera posturing that's substituted for genuine debate on health reform over the past year. With compromise proposals that fail to deliver, it's looking more and more as if the choice in Washington is between reconciliation or ritual.
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