Progressives Had To Let Healthcare Reform Pass-- It Was Life And Death-- But Less Than Mediocre Financial Reform? Why Bother?

Wednesday night Olbermann had Barney Frank on Countdown as a guest to talk about the next big thing, post healthcare "reform," financial reform. Barney's Wall Street reform bill-- the one that passed the House-- was pretty decent (as the House's original healthcare bill was). Barney's leaves a lot to be desired and so did the healthcare bill. But the healthcare bill, even with a weakish public option instead of single player, was a lot better than what the Senate Democrats are puking out. And, no doubt, Barney's bill will be looked back on as far better than the crap the Democrats eventually reduce financial reform to. Barney's bill passed the House with exactly zero Republicans (and with 27 mostly conservative Dems voting with the GOP) but keep in mind that last time the Senate Democrats had the discomfort of a 60-vote super-majority-- albeit a super-majority dependent on corrupt, conservative prima donnas like Ben Nelson, Blanche Lincoln, Max Baucus, Joe Lieberman, et al. At least this time, all the compromising can be painted as something the Republcians are making them do. Yesterday, though, BigTentDemocrat, in discussing energy policy, went on very powerfully about triangulation as a political strategy. I recommend it highly.

Meanwhile there's an argument going on. Sensible people, like Kevin Drum, make a good, commonsense case why, for example, insider trading-- maybe all trading-- of credit default swaps should be banned. Jim DeMint, predictably, argues for the Law of the Jungle and against society protecting itself from predators, (like his campaign contributors). Not DeMint:

Financial regulatory reform is looking better all the time, isn't it? No serious capital or leverage requirements. A consumer protection agency housed at the Fed and barely worth the paper it's implemented on. And no exchange trading of CDS because the exchanges don't want to do it and Congress probably won't force them to. I don't know about you, but I'm about ready to say we should just scrap the whole thing and admit that we're OK with Wall Street plutocrats continuing to run the country for their own benefit until they destroy the country properly. At least that would have the virtue of honesty.

And by the way: Felix will shoot me for saying this, but I've pretty much come to the conclusion that credit default swaps should simply be banned. Their benefits are actually pretty minimal, while their vulnerability to abuse seems almost unlimited. I'm having a harder and harder time these days buying the case that we can regulate them into submission.

Before you watch the little kabuki show below, please take a look at the review of the ill-attended financial reform concert that's been playing out Inside-the-Beltway by Chris Hayes, something that Digby alerted me to early yesterday. Hayes is even more pessimistic than I am. And his analysis of Barney's bill-- the one that is about to get much worse-- gets a much lower grade in his estimation. "The bill," he writes, "gets, at best, a B-. There are some strong provisions-- an independent consumer protection agency and caps on leverage-- and some gaping loopholes, such as exceptions for derivatives that render the new requirements largely moot. Even after Wall Street lobbyists had nibbled and chomped through it in committee, the Financial Services Roundtable and Chamber of Commerce still opposed it, which counts as no small point in its favor. The bill passed with-- surprise!-- zero Republican votes." He further warns that "a weakened version of the already watered-down House bill will need to be diluted even further to pass." I know for sure Barney, an incrementalist at heart, isn't going to agree with Chris' strategy for progressives:

Progressive critics of the healthcare reform bill like Bernie Sanders and Dennis Kucinich voted for it because they were persuaded that the bill moved things in the right direction and would provide immense relief and security to millions of Americans. With financial regulation, the banks aren't holding 30 million uninsured Americans hostage. And a bill that passes but doesn't reconfigure the political economy of the financial sector stands a good chance of making things worse, allowing Washington and Wall Street to go back to the status quo with a false sense of security that the problem has been solved. At this point, I think the House bill with stronger derivatives language would clear the bar. But throughout the next few months, the most important part of the fight to watch is how the banks react as the legislation develops. If the banks aren't fighting and squealing like hell, you'll know the reform isn't worth the paper it's written on. And if you see the main industry groups actually endorsing the final product, as, say, AHIP and PhRMA did with healthcare reform, then it's time to bring those "kill the bill" chants out of retirement.

Now, the Keith and Corker and Barney show:

UPDATE: Krugman Knows A Little Something About Financial Reform

And he gives us a beginners guide in the Times today, although, obviously, isn't bothering to factor in the Republicans, virtually all of whom "don’t really want any reform at all... Whatever such people may say, they will always find reasons to say no to any actual proposal to rein in runaway bankers."

Even among those who really do want reform, however, there’s a major debate about what’s really essential. One side-- exemplified by Paul Volcker, the redoubtable former Federal Reserve chairman-- sees limiting the size and scope of the biggest banks as the core issue in reform. The other side-- a group that includes yours truly-- disagrees, and argues that the important thing is to regulate what banks do, not how big they get.

It’s easy to see where concerns about banks that are “too big to fail” come from. In the face of financial crisis, the U.S. government provided cash and guarantees to financial institutions whose failure, it feared, might bring down the whole system. And the rescue operation was mainly focused on a handful of big players: A.I.G., Citigroup, Bank of America, and so on.

This rescue was necessary, but it put taxpayers on the hook for potentially large losses. And it also established a dangerous precedent: big financial institutions, we now know, will be bailed out in times of crisis. And this, it’s argued, will encourage even riskier behavior in the future, since executives at big banks will know that it’s heads they win, tails taxpayers lose.

The solution, say people like Mr. Volcker, is to break big financial institutions into units that aren’t too big to fail, making future bailouts unnecessary and restoring market discipline.

It’s a convincing-sounding argument, but I’m one of those people who doesn’t buy it.