Bring it on

If Republicans want to make financial services reform an issue in November, the Democrats should be happy to help them.

All 61 41 Republicans in the Senate have now signed a letter threatening to block consideration of Wall Street reform unless the Democrats, who have been trying for months without success to work with Republicans to craft a bipartisan bill, agree to work with Republicans to craft a bipartisan bill that consists only of provisions Republicans like.

I’m surprised that McConnell could pull this off; I doubt Snowe, Collins, or above all Brown really wants to vote to sustain a filibuster of a bill to rein in Wall Street excesses. If push comes to shove, one of them is likely to defect. But if the Republicans want to prevent the passage of any financial reform and let the question of whether to get tough on bankers be an issue in November, that’s OK with me. And I bet it’s OK with Reid, Pelosi, and Obama as well. The Goldman Sachs indictment securities-fraud case is surely not the only one we’ll see between now and Election Day.

If I were Reid, I’d just tell McConnell that I’m planning a cloture vote once a week until someone cracks. This looks like a no-lose proposition to me.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

25 thoughts on “Bring it on”

  1. Did you mean all 41 republicans? Or did you mean republican by the definition of republican in the 40's, 50's, and 60's which would include at least 10 current democratic senators?

  2. I think I'm going to submit "reform" as the word most deserving of banishment this year, for over-use and general meaninglessness. We'd be much further ahead in our political discourse if we replaced it with "change".

  3. I doubt Snowe, Collins, or above all Brown really wants to vote to sustain a filibuster..

    I'm not so sure. Snowe and Collins talk a good game, but seem to toe the line when McConnell wants them to. I sometimes think they've been assigned to slow down all Democratic legislation by acting as if they are interested in negotiation. What Brown does depends on his ambitions. If he really wants to get re-elected then he might defect. But if not, or he recognizes that his win was a fluke unlikely to be repeated, he might think that being loyal to the GOP will help him after he leaves the Senate.

  4. Goldman Sachs–one of the biggest financial supporters of Obama's campaign–was not indicted. The SEC brought a civil action for fraud.

  5. In this lull between now and the upcoming SCOTUS fight, I'd like to bear witness to the Republican filibuster and their arguments behind their resistance to Wall Street reform. Reid should accommodate McConnell's threat!

  6. If I were Reid, I’d just tell McConnell that I’m planning a cloture vote once a week until someone cracks.

    Mark, maybe you can start a drive to raise some money.

    I'm thinking a case of liquid courage might help Reid "stone up."

    And Cutty Sark Whiskey seems to have the proper disambiguation:

    Cutty Sark –the only survivor of the British tea clippers,

    launched in 1869 and now preserved as a museum ship at Greenwich, London.

  7. According to what I read elsewhere, the letter threatens to oppose financial reform legislation, not to block consideration. Apparently at least one senator (Snowe?) wouldn't sign a filibuster threat.

  8. I'd like to hear a bit more about the merits of this bill before taking a position on the foodfight, but the RBC has been pretty quiet on them up to now. Because ultimately if the Republicans succeed in killing a bad bill, they will have a victory they actually deserve right when they should be denied one. I mean, how do the Democrats fumble Wall Street reform? By putting forth a wussy bill that can be demagogued by the populists (of whom plenty are Democrats). So is the Dodd bill strong enough? Was the House's bill strong enough?

  9. Kevin, your questions are pefectly valid, but you propose too limited a range of R options. In addition to killing or approving a D bill, they could improve it, or offer a serious alternative.

  10. Warren, you are entirely right that the R's could do those things, and indeed there's no doubt they should. But since we as citizens are stuck with the GOP as it currently exists, we have to make our strategic decisions about who to support right now on the basis of what they are likely to do. Thus if we are concerned to get a good Wall Street bill, we should be thinking about how to do that given total GOP obstruction. And given total GOP obstruction, no bill is probably better than a bad bill, since, as Krugman wrote a while back, a bad bill would give us all a false sense of security. So, can the GOP help us get a better bill? Sure. Are they likely to do so in the current climate, with their base radicalized, polarized and mobilized? Probably not.

  11. I’m not convinced M.A.R.K. doesn’t assume too much of voters. A lot of people hate Big Government more than they fear a Big Depression. Some number who do fear another Great Depression have spent the period since Aug-Sept 2008 retrofitting whatever disorienting memories they retain of the crisis into a counter-narrative the motor of which is, approximately, a spendthrift socialist conspiracy to destroy freedom. Alarmingly little of what the average layperson has heard over the last 18 months would have encouraged her to spare a thought for the stability of financial markets, & she may have been told repeatedly to worry about the threat any regulatory structure poses to her life. Arguably, market triumphalism is stronger now among plain people than it was before the crisis. (Cf. When Prophecy Fails.) All this is to say that in the current febrile environment McConnell et al aren’t necessarily crazy to think they can get away with murder.

  12. Fearing a Big Depression is part of hating Big Government. Until our government started trying to stabilize the economy, we had small depressions. It's a standard observation of systems control theory: A control algorithm that's badly implemented can make the system more unstable than it was with no control algorithm at all. You can't just assume, a priori, that the government's efforts to stabilize the economy are going to do more good than bad.

    It is, in fact, rational, when the government is continuously intervening to stabilize the economy, to lose faith in such efforts when the economy instead demonstrates instability. Is your belief in such efforts unfalsifiable? If so, you're in a poor position to accuse anybody else of irrationality.

  13. Brett: The history of the last century shows the opposite of your contention. The Great Depression of the 1930s certainly followed a period of government non-intervention with bubbles growing and busting until the inevetable big bust of 1929. The regulation put in place by the FDR administration (SEC, Gass/Steagle Act,…) led to a stabaized economy that worked quite well until it was dismantled by the "conservative" deregulators of the 1980-90s.

    I think your idea about the effect of feedback loops may have some validity but in the exact opposite direction. I think that the economic behehoths of Wall Street are the forces that perturb the system by manipulating markets in ways they can take advantage from. This of course is human nature and will happen any time people are allowed to make such choices. The point of regulation is to defuse that power and allow a truly fair free market to function for the greater good of the economy but to the detriment of a select few who would use their infuence and power to rig the game.

    While regulation can certainly be done badly not regulating these markets will inevetibly lead to trouble because there is just too much incentive for big players to do the very kind of things that GolmanSachs is accused of doing. What I don't understand is why so many intelligent people pretend this is not obvious and that it hasn't been proven by history. Or maybe I just don't see how they can say it with a straight face.

  14. The reason so many intelligent people don't accept this involves a couple of facts:

    1. The economy went through booms and busts prior to governmental stabilization, but they were relatively small booms and busts. Along comes governmental stabilization, and the bust goes on and on… Funny, that, the first time they try to treat the problem, it ends up being really, really bad.

    2. The government is the biggest of the big players.

  15. Mr Bellmore –"The economy went through booms and busts prior to governmental stabilization, but they were relatively small booms and busts."

    Actually, no.

    Before the government started to "stabilize" the macro-economy, it was much more volatile than since. That's true even if we pretend that macro-e

    Between 1870 and 1912, before the Federal Reserve even existed, real GDP per capita swung wildly from year to year: the average swing was 4%. Since 1947, when the EMployment Act was adopted, the average swing has been only 2.7%, a third less. And average annual growth has been higher.

    All in all, government stabilization of the economy has been a stunning success … which is why the government of every developed country in the world regards it as a primary responsibility.

  16. Perverse monetary policy was the greatest cause of the Great Depression. But five non-monetary missteps were important in making the Depression great, and the same missteps damaged the global economy as well. While many are thinking about the Depression, few seem concerned about replicating these Foolish Five today:

    • Giving in to protectionism. […]

    • Blaming the messenger. […]

    • Increasing taxes in a downturn. […]

    • Assuming bigger government will bring back growth. […]

    • Ignoring the cost of inconsistency. […]


    Five Ways to Wreck a Recovery

  17. I particularly love this: 'Assuming bigger government will bring back growth.'

    Have either you or she ever **looked** at a graph of growth rates in this period? By year – not playing dishonest wh*redaughter aggregation games?

  18. Shlaes writes:

    The new Tennessee Valley Authority and Roosevelt's repressive Public Utility Holding Company Act combined to crowd out private utilities that hoped to light up the South. As for Wall Street, those New Yorker magazine cartoons were accurate: Wall Streeters retreated into their martinis and country houses rather than rebuild. This yielded the "Depression within the Depression" of 1937.

    This is arrant nonsense. The economy declined in 1937 because FDR foolishly listened to those who insisted that the the budget had to be balanced right then. This had nothing to with TVA crowding out private utilities.

  19. Others have pointed to some relevant economic history. Also see:

    My point was to note the extent to which the lay public's sense of the seriousness of the Aug-Sept 2008 events has either been lost or suppressed, or the anxieties it gave rise to have been displaced onto various phantoms of the rightwing imagination. The gravest market crisis of our lifetimes has redoubled dogmatic hostility to regulation of markets. I'm not just referring to the sort of cranks we see here, who're a minor nuisance. The reaction reaches the broader center-right population, & Republican members of Congress, even the economically literate ones, have been happy to cultivate & make use of it.

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