So the Senate voted yesterday evening. It went down by 61-33. That is frankly a crushing defeat.
The roll call has its interesting moments, notably that Alabama Republican Richard Shelby voted for it. Shelby is the leading GOP negotiator on the bill. Two other GOPers also backed it.
The Democrats split 30 for, and 27 against. Looking at those groupings will give you a pretty good idea of the nature of the divide within the Senate Democratic caucus.
As recently as last night I still had some hopes that this Financial Regulatory Reform bill might turn into something real. I was in DC watching the debate on the Senate floor yesterday and aside from being amused by the utterly schizophrenic Republican strategy for attacking the bill (several Republican Senators yesterday veered into discussions of how the new Consumer Financial Protection Agency would harm, of all people, orthodontists) there was little to the naked eye that suggested the whole thing was a farce.
In general I got the sense that many of the members on both sides of the aisle were genuinely freaked out by the snowballing corruption on Wall Street and wanted to sink at least one real fang or two into the problem, though they differed on how to get there.
This is different than the health care debate, which throughout to me felt like a gigantic mountain of posturing and back-room money-dealing smothering the genuinely passionate advocacy of a tiny legislative minority that really wanted to fix the health care problem. In the FinReg business I talked to more members and aides who believed there was real room for something genuine to happen, if only because the political/financial situation in Europe (and the serendipitous timing of the Goldman case) is putting wind at the back of previously dead or dormant reform proposals.
Then last night came to pass, or not pass, as it were.
To me there are three really big parts of the bill. There’s resolution authority/Too-Big-To-Fail, addressing how to deal with systemically ginormous companies like AIG when they go belly up and threaten the survival of the planet.
There’s the derivatives portion, which covers a more or less completely unregulated $600 trillion market.
And there’s the Volcker Rule stuff, trying to bring back Glass-Steagall, preventing banks from turbo-gambling on their prop trading desks while simultaneously acting as ostensibly safe depository institutions. An amendment by Carl Levin and Jeff Merkley is the route for dealing with that last part.
A bill that included strong reform on one of those three counts would be at least passably significant. Two out of three would still be woefully inadequate, but a good start. And none out of three would officially reduce all this to a dog-and-pony show.
Well, the count is 0 and 1. Last night the Too-Big-To-Fail amendment, a strong proposal put forward by Delaware’s Ted Kaufman and Ohio’s Sherrod Brown, got pulverized in a late-night vote. An amazing 27 Democrats voted against the bill, which would have put hard caps on the size and risk profiles of financial companies.
In a wittily insulting footnote to this massacre, Alabaman Obfuscation King Richard Shelby, the guy who has been leading the transparently lobbyist-driven and shockingly (even by DC standards) cynical Republican filibusters of this bill, actually voted for the Brown/Kaufman amendment. I have no idea if this was Shelby’s idea of a joke or what, but somehow seeing this bloated old hack cast a quixotic Yea for this urgently necessary measure while 27 Democrats slithered back into the lobbyist camp to cast Nay votes was the most obnoxious part of this whole sordid affair.
That Brown/Kaufman got beat even worse than Shelby’s own pathetic substitute amendment on the Consumer Financial Protection stuff — the Shelby amendment that got 38 Yeas to Brown/Kaufman’s 31 was a proposal to surgically excise the Consumer Protection aspect of the bill — pretty much tells you everything you need to know about how hard it is to get real reforms passed in this Senate.
Brown/Kaufman was an obvious and logical response to the great cancer of our financial system, the rapid consolidation of power and market share in the hands of a few banks. The measure would have mandated the breakup of companies that grew beyond strictly prescribed limits, and it seems to me that it failed precisely because was a real law with no loopholes.
The Shelby amendment, on the other hand, was an open proposal to do nothing. And again, it got beat, too, but it didn’t get beat as badly as Brown/Kaufman, especially when one considers that the Democrats could have carried Brown/Kaufman all by themselves.
There’s a lot of ugly legislative backstory to all these maneuvers and if Levin/Merkley and some of the other key measures suffer the same fate as Brown/Kaufman, the Democrats and the Republicans will both come out of this wearing a lot of shame. More on this later — I also have a piece on the bill coming out in Rolling Stone in a few weeks.