OK, so Krugman isn't wild about Dodd's banking reform bill. Nevertheless he is bending over backwards to make it sound better than it is.
[H]ow good is the legislation on the table, the bill put together by Senator Chris Dodd of Connecticut?
Not good enough. It's a good-faith effort to do what needs to be done, but it would create a system highly dependent on the wisdom and good intentions of government officials. And as the history of the last decade demonstrates, trusting in the quality of officials can be dangerous to the economy's health.
"Good faith effort"? That's pushing the benefit of the doubt past the breaking point. The admittedly minimal House bill was a "good faith effort" if your definition of "good faith" is an effort to just barely control the worst of Wall Street's usual financial scams, shenanigans, and skullduggery. Dodd's bill is a bad faith effort to make non-reform smell like reform, thus keeping Wall Street happy with him so his life-after-the-Senate will be a very comfortable one.
Still, Krugman gets that the bill won't work as is and points to one of the key reasons: the "oversight" is basically self-oversight.
[W]hat will actually be in those "strict rules" for capital, liquidity, and so on? The bill doesn't say. Instead, everything is left at the discretion of the Financial Stability Oversight Council, a sort of interagency task force including the chairman of the Federal Reserve, the Treasury secretary, the comptroller of the currency and the heads of five other federal agencies.
[J]ust consider who would have been on that council in 2005, which was probably the peak year for irresponsible lending.
Well, in 2005 the chairman of the Fed was Alan Greenspan, who dismissed warnings about the housing bubble - and who asserted in October 2005 that "increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system."
Meanwhile, the secretary of the Treasury was John Snow, who ... actually, I don't think anyone remembers anything about Mr. Snow, other than the fact that Karl Rove treated him like an errand boy.
The comptroller of the currency was John Dugan, who still holds the office. He was recently the subject of a profile in The Times, which noted his habit of blocking efforts by states to crack down on abusive consumer lending, on the grounds that he, not the states, has authority over national banks - except that he himself almost never acts to protect consumers.
Oh, and on the subject of consumer protection: the Dodd bill creates a more or less independent agency to protect consumers against abusive lending, albeit one housed at the Fed. That's a good thing. But it gives the oversight council the ability to override the agency's recommendations.
Foxes-in-the-henhouse are not "watchdogs". Their usefulness ranges from enabling to resident doormat to outright sabotage. Creatures of Wall Street don't recognize any reality unless it's approved and promoted on Wall Street. Main Street? Who cares? What do they know?
So the Kabuki goes on. The Miami Herald's Jim Morin nails it:
Yessir, see that hat? I'm convinced.
Thing is, everybody knows better. Even The New Republic recognizes that Obama's got the votes for real reform and the only question is, does he actually want it?
In the end, though, the most reliable guide to what's likely to happen is discerning who has leverage. And, even once you strip away all the rhetoric and the personal narratives, it's clearly the Democrats who have it. The outcome the industry fears most is that Democrats pass a tough bill on an overwhelmingly partisan vote, isolating Republicans as reflexive defenders of Wall Street. "Everyone in the industry, their line is very simple," says another administration official. "They want a bipartisan bill."
According to this same official, the administration doesn't expect to have trouble finding one or two Republican senators to break a filibuster, even for a hawkish bill. "Frankly there's a category of [Republican] who is fed up with the party on the issue. They've told me so privately," the official says. "They don't want to be caught on wrong side of it." Which means Democrats have the ability to force Wall Street to move their way-not just on the consumer agency, but across the board. The only question is whether they use it.
The answer is, of course, no they won't because their owners are the very people they're supposed to be regulating and the owners don't want to be regulated in any way or form that might slow down the flow of profits. As Cory Doctorow used to say, "Relying on incumbents to produce your revolutions is not a good strategy."
People are beginning to look at the 3-year-old economic downturn as a permanent condition rather than a storm to be weathered.
Because we're not as stupid as the BD/GOP party thinks we are. We know Washington is owned and operated by the rich, multinational corporations, and good ole Wall Street, not one of whom gives a rat's ass if the country turns into Rwanda as long as they're still making Big $$$ from the disintegration. We know that nobody's going to do a damn thing Wall Street doesn 't tell them to do. There isn't going to be any regulation and everything is going to keep right on going to hell because that's where the bankers want it to go. Or, as Mark would put it:
Just put buddy Jon on the road back to Wisconsin, but over coffee this morning our conversation prompted me to wonder aloud, is there any foreign threat to the well being of this nation half as menacing as the threat posed by Wall Street and our predator class capitalist overlords?
No, we couldn't think of a single nation that qualified except maybe the Soviet Union ten years down the road after a major meth epidemic.
Kill Wall Street before it kills us.
That may be the only choice they've left us.
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