Maximizing the Financial Regulation Debate

Last night on MSNBC [1], Rachel Maddow and I discussed John McCain's new rhetoric claiming he supports better financial regulation. But instead of focusing only on McCain's words, we tried to follow in the spirit of the Institute for America's Future's call for a substantive debate [2] by examining the Arizona senator's career as a public official - one who's formative regulatory experience was being a member of the Keating Five pressing federal financial regulators to stop doing their job in advance of the S&L crisis (ie. the most analogous crisis to today's Wall Street meltdown).

McCain, as the S&L scandal first suggested, is no run-of-the-mill free-market fundamentalist. Yes, he voted for the ill-advised repeal [3] of the key Depression-era law that might have prevented the rampant consolidation and speculation that brought on today's emergency. But, then again, Bill Clinton and his DLC Democrats supported it too. Yes, McCain's top economic adviser is Phil Gramm, the UBS investment banker who pushed through so much deregulatory legislation as a senator. But then again, Barack Obama's top economic adviser is Robert Wolf, Gramm's UBS boss.

Where McCain really leaps to the fringe and differentiates his extremism from others is in his use of the deregulatory label to publicly define himself. That's how you can really tell what a politician believes in.

This is not a guy who just votes for the corrupt legislation his Wall Street friends tell him to vote for - this is a guy who has staked his name on being "fundamentally a deregulator," as he recently described himself.

On 11/19/93, McCain took to the Senate floor to support an early financial deregulation bill and decry what he called "the tremendous regulatory burden imposed on financial institutions." The guy who now claims to be the trustbusting Teddy Roosevelt back then lamented "the rapidly increasing regulatory burden imposed on banks is to cause them to devote substantial time, energy and money to compliance rather than meeting the credit needs of the community."

Ten years later, McCain was bragging to the Associated Press [4] that "I have a long voting record in support of deregulation," and to CNN [5] that "I am a deregulator. I believe in deregulation."

And, during this year's presidential campaign taking place in the shadow of financial meltdown, McCain was only months ago insisting on PBS that "we need less government [and] less regulation" and that "I'm always for less regulation." [6]

Of course, there's plenty of good news for both Democratic partisans and ideological progressives about McCain's about-face.

For partisans concerned only about Obama winning the election, McCain's 180 on regulation opens up an obvious chance for Democrats to label him a against-it-before-I-was-for-it, say-anything-to-get-elected hypocrite - and Obama is (finally) moving to seize that opportunity [7].

For ideological progressives long fighting the good fight to resurrect the common-good regulatory agenda of the New Deal, McCain's shift reflects a broader shift in the public debate. Suddenly, regulation isn't a four-letter word anymore. Suddenly, even John "I'm always for less regulation" McCain is for regulation. That rhetorical shift could help create an election mandate forcing whoever wins the presidential contest to actually move away from Reagan-style extremism for the first time since, well, Reagan.

But as I told Maddow (and as I will examine further in my upcoming newspaper column on Friday), we have to all follow the money and the actions. Both Obama and McCain have taken huge sums of cash from the industries that caused this crisis. Both Obama and McCain continue to rely on Wall Streeters who engineered the meltdown as their top economic advisers (though only McCain employs lobbyists intimately involved in the crisis). That kind of influence doesn't just slink away with a boom-bust crisis - it fights hard to make sure nothing concrete comes out of the situation (think the weak Sarbanes-Oxley after Enron).

Whether we get the kind of populist reforms will be decided by how much grassroots pressure is put on either of these potential presidents when they reach the Oval Office. The talk right now from both candidates may be good - and Obama is smart to point out McCain's absurdly dishonest rhetoric. But talk is cheap when it comes time to write legislation.