By Simon Johnson, co-author of 13 Bankers
No one can publicly oppose what is widely perceived to be “financial reform” – the polls are quite clear on this point. If you want to help Wall Street, your options are:
1) Oppose the Dodd bill, claiming that it would create a more dangerous situation than what exists today. But Senator Mitch McConnell already tried this and was thoroughly debunked, e.g., by Senator Ted Kaufman. There will be rhetorical posturing along these lines, to be sure, but there is no sign of any real traction.
2) Run a comprehensive “astro turf” disinformation campaign, pretending to be the voice of “true reform.” But these efforts are too obvious at this point – and too obviously fraudulent, so this actually helps the pro-reform narrative.
3) Stall for time in terms of preventing the Dodd bill from coming to the floor of the Senate, while working out a backroom compromise that will greatly gut the substance (on consumer protection, derivatives, and/or the resolution authority). This appears to be what the Republicans are focusing on, with Senator Richard Shelby in the lead.
But there is a potential weak point in this Republican strategy.
If the Democratic leadership becomes fed up with Republican stalling – or otherwise sees an opportunity to paint the Republicans as completely obstructionist, they could actually strengthen the bill.
For example, including something like the Brown-Kaufman amendment (or otherwise addressing the issues posed by our six megabanks) would make it easier for people to understand what is at stake. To win on this issue in November, the Democrats may need to simplify their message and make it more powerful. Some relatively pro-Wall Street Democrats are reluctant to do this, but if the Republicans stand united, nothing will pass – so why not propose something stronger that will go down to clear and memorable defeat, particularly after a searing debate?
The Republicans are not the only ones who can maneuver here. By delaying any progress, they are creating an opportunity within the Democratic side to find ways forward that are not entirely designed by Senator Dodd.
The Goldman Sachs appearance between Senator Carl Levin’s subcommittee on investigations is one wild card tomorrow. President Obama beginning to become more energized and focused on this issue – including at least one speech this week – is another.
Republican stalling tactics have, in effect, introduced a greater element of randomness into the process.
The Republicans obviously want to slow reform or make it change direction. They should be careful what they wish for.