Bipartisan bickering puts a hold on much-needed banking reform

As we continue to deal with the repercussions of the financial crisis of 2008, and as we as a nation slowly climb out of what economists have come to refer to as the Great Recession, it is becoming increasingly apparent that the American financial system is in dire need of regulatory reform. Yet while polls show that the majority of Americans agree that there is an increased need for financial regulation and consumer protection, our elected officials in Congress are doing a little too good of a job of demonstrating how our government was structurally designed to be inefficient. 

Even though the Republicans in the Senate finally agreed (after three days of voting against the bill) to allow the financial reform bill to go to debate on the Senate floor on April 28, this progress only came about after a deliberate effort to have the bill dropped on completely illogical and fabricated grounds. This debate will last a minimum of two weeks and will likely result in the creation of another healthcare-reform-like bastard child.

At a time when there is the greatest need for bipartisan cooperation, the Republican Party and its representatives continue to play the childish and destructive role of the “No Party.” Before the financial reform bill even made it to a vote by the Senate, Republican wordsmiths such as Frank Luntz were fiendishly – and I hate to admit it, but brilliantly – working to twist the American public’s perception of the newly proposed banking reform.

In a 17-page memo, Luntz outlined exactly how the Republican Party could effectively “kill financial reform.” In it, he asserted that Republicans must appear to be in favor of reform. However, they should then claim that they cannot go along with the newly proposed Democratic legislation because it is simply another form of “Big Bank Bailouts” that would increase the bureaucracy of the financial system, pander to special interest groups, and provide more regulatory loopholes that would only benefit big corporations. Like I said, this strategy is brilliant. Luntz understands exactly what he is doing – reframing the issue in a way that emphasizes every aspect of the current financial system that Americans are upset with. 

What is so desperately unfortunate about this memo is that people like Luntz and those that incorporate his doctrines into their political rhetoric (like Republican Senator Jerry Moran from Kansas) is that it seriously delegitimizes the political debate in a way that only leads to confusion and anger. Furthermore, as these arguments are repeated, they are perpetuated and it becomes more and more difficult for the American constituency to distinguish what is fact or fiction. What’s worse is that Luntz not only advocated that Republicans make this argument, but that they should also make changes to the banking reform bill that would make these claims true and then say, “See, we told you it was riddled with loopholes and bailouts.” 

Thankfully, for the first time in a while, the manipulative nature of the Republican Party’s arguments and wordsmiths have been recognized by American conservatives as being as unfounded as they truly are. But while the word game blockade has been deconstructed, there still stands the barrier of an endless string of amendments made to the bill – amendments which could potentially make it ineffectual in the prevention of a future financial crisis as well as effectively dealing with one once it occurs. However, despite the delayed progress, as the debates on the Senate floor continue, it is looking as if there is indeed a chance of legitimate legislative reform.

Senate Democrats have taken charge of the debate and have been making a number of proposed amendments to the financial reform bill that are designed to seriously tighten the operations of both big banks and Wall Street. A number of Democratic amendments have already been passed as of this Wednesday, including one that will ensure that, in the event of another financial crisis, taxpayers will not bear the burden of bailing out the banks as they did in 2008. In addition to the amendments that have already been approved, there are still a number on the table that could greatly change the future of the American market. 

Of these new proposals, there is the Brown-Kaufman proposal, designed to break up the biggest banks like Citigroup and Goldman Sachs by placing caps on the deposits they can hold and limiting their liabilities. Also, there is talk of placing further restrictions on the banks by instating the Volcker Rule to bar banks from proprietary trading. Moreover, on the market side, there is a considerable amount of support for reinstating the Glass-Steagall Act which was first put on the books after the Great Depression but was then repealed by Congress in 1999. (The Glass-Steagall Act was designed to create a firewall between commercial and investment banking.) And, in terms of the more extreme proposals, Independent Senator Bernard Sanders of Vermont is pushing for a public auditing of the Federal Reserve despite opposition from both the Fed and the White House. 

What started out as a political stalemate in the face of a need for real change in the American economic market has progressed into a cohesive and productive debate on the Senate floor which has already proven to be moving towards real progressive reform. This is, without a doubt, a historic moment in terms of economic regulatory legislation and, depending on the makeup and number of amendments passed, this bill could greatly alter the nature and operations of our biggest banks and investment markets.