How the Senate Financial Reform Bill Gained Strength

There’s a general consensus that the Senate Bill is strong, even surprisingly strong, with everyone being blindsided as to how that happened. Here’s Edmund L. Andrews and Katherine Reynolds Lewis:

Bulked Up, Not Watered Down

Industry lobbyists are stunned that the bill became tougher rather than weaker as it progressed through the Senate…Scott E. Talbott, a top lobbyist for the Financial Services Roundtable, which has adamantly fought against many provisions in the Senate bill, sounded almost shell-shocked by the bill’s breadth…

The bill is a major victory for President Obama and a valedictory for retiring Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. Dodd was the guiding force who overcame strong opposition from many Republicans and some Democrats and skillfully navigated past numerous procedural barriers.

A lot of people, notably Americans for Financial Reform, have been fighting day in and day out for financial reform. But even with all their efforts, 3 months ago people were very greatly discouraged about what could have been accomplished in the Senate.

This also took place with health care passing in the background, so that gave the Democrats an energy that they didn’t have in the Senate previously. Having watched the battle unfold both in the House and the Senate in real time, there are three key decisions that were made by individuals that turned out to be game-changers.

The first was Chris Dodd’s decision to go it alone and release his own bill rather than water it down to get Republican support in committee. This watering down process between Dodd and the Republicans on his committee sent me in a serious depression over the prospects of financial reform. Shelby had walked away from the debate, Corker was trying to play the role to get a bill out, and then Dodd decided to go on his own. He also called for a vote immediately to get it out of conference without calling any amendments. And it turned out to be the right decision.

The second is the decision to have amendments go for votes. Many, including myself, are disappointed that not enough important amendments got a vote in the Senate. But it is important to remember that there was a moment where there weren’t going to be any votes on any amendments. And it’s only through progressive senators demanding votes on amendments that they went to the floor. And only by demanding votes, and forcing Republicans and Democrats to vote for or against Wall Street, was progress able to be made.

But the most important part of this was the third reason, and that is the primary challenge of Senator Lincoln. I think a lot of people are going to read this backwards as the Senate momentum getting strong because of the SEC’s April 16th charges against Goldman, further investigations and coverage and Goldman’s tone-deaf response. I’m not sure how much of an effect that had. Americans didn’t go to bed April 15th thinking Goldman and the rest of the Wall Street firms were businesses that hadn’t been bailed out without any major repercussions and still retained their power, while the rest of the economy suffered under massive unemployment.

I will say one thing that was a game-changer: Blanche Lincoln had written a derivatives bill that sent everyone scrambling. Everyone. On April 16th everything changed, but because of the derivatives language that was introduced into this bill.

Especially the Section 106/716 language, which would spin out the dealers from commercial banks. Noam Scheiber got this dynamic perfect, noting that all the lobbyist energy had suddenly turned to scrapping this very specific derivatives language, and even with huge opinions against it, it got out of the Senate. This left little time to attack other things.

What’s important here is that Senator Lincoln didn’t decide to do it randomly, as if because a butterfly flapped its wings in Brazil. She did it because she had a primary challenger in Arkansas — Lt. Governor Bill Halter, who deserves a lot of credit for stepping up and risking his political career to challenge an entrenched incumbent. Arkansas Democratic primary voters were open to hearing different ideas about what kind of representation they wanted, but they couldn’t demand better from Lincoln without an alternative in the race.

And politics is a team sport. Halter was recruited and supported by many local Arkansas Democrats, Glenn Greenwald and Jane Hamsher of Accountability Now, the hundreds of thousands of members of the Progressive Change Campaign Committee, Markos Moulitsas-Zuniga and the Dailykos community, the millions of members of Moveon, and the millions of members of the SEIU and the AFL-CIO.

The other team was mobilized as well. The bank-dominated US Chamber of Commerce, which is fighting against Lincoln’s derivatives language, was advertising on her behalf in the race.

But it was the people-powered groups that had more power in the primary. Lincoln knew that if she watered down her derivatives language, it would be known and that information would be given to voters. Special thanks are owed to these groups, who deserve a central place at the story for why this Senate bill is so strong, but so far I’ve seen very little attention given to them.

Which is to say that when democratic officials are held accountable for their votes they do the right thing. And ordinary people can make a difference, if they pool their efforts and engage in smart and aggressive strategies at the ballot box. It’s a simple set of lessons, but it’s always good to relearn them.

Mike Konczal is a fellow with the Roosevelt Institute and a blogger at rortybomb.com.