Ezra wishes the government had done financial regulatory reform in the spring because it would have been better politics. And true, if the task had been done earlier, some the bailout anger would have dissipated. But despite Ezra's casual dismissal of the arguments that it would have been impossible to do regulatory reform on his preferred schedule, this politically nice idea has little basis in reality.One good analogy to Ezra's question is saying, "I wish we'd done health care reform in April, right after the stimulus." Why didn't we health care reform immediately? Because it's an extremely complex policy issue with multiple stakeholders, that comes under the jurisdiction of multiple congressional committees, and had to come after emergency economic measures, like the stimulus package, and necessary administrative tasks, like the budget, were sorted out -- just like financial regulatory reform. And unlike regulatory reform, health care reform is an issue where the policy has been discussed, at least among Democrats, for years -- remember the primaries and the great mandate debate? I don't recall any minute analysis of competing regulatory reform plans from the different candidates. (For instance, Health Care for Americans Now? Launched on June, 8 2008. Americans for Financial Reform, it's equivalent? Launched on June 16, 2009.) No one really thought about comprehensive financial regulation reform until last summer's great crash. Then the government went into "let the Fed take over" crisis mode until, oh, the president's inauguration, when it still wasn't clear whether we'd face a massive deflationary spiral or not. Then we had months of arguments about the cause of the crises -- remember the liquidity versus solvency debates about how to rescue the banks? -- and thus how to prevent future problems. The stress tests and subsequent private recapitalization that more-or-less ended that discussion, or at least put the two opposing camps into an uneasy cease-fire, didn't happen until mid-May. And in June, the administration released it's regulatory reform plan, which it had worked on for months prior and has been the subject of steady congressional committee work all summer. (One specific bandwith problem was that the chairman of the Senate Banking Committee, Chris Dodd, has also been running health care reform at the Senate Health, Education, Labor and Pensions Committee).Conceivably, though, the administration could have put regulatory reform on the health care schedule, and have bills ready for the floor now. But if we've learned anything over the past summer, health care reform is an issue that people -- especially people who are politically active, who disproportionately have insurance -- aren't necessarily hugely enthusiastic about; the task will require much of the president's political capital. But as Ezra notes, anger at the banks hasn't gone away over the summer, and it's still there for politicians to harness in the interest of reform. And while the banks have regained their financial footing over the summer, it's not as though their political clout ever really changed -- they were killing bills in the senate this spring -- and most observers I speak to haven't noticed that the banks are any stronger or weaker, politically, over the past six months. Republicans may be stronger now than in April or May. But as Chuck Schumer told me this week, the banks and their allies don't have the public on their side. While it might have been politically convenient to do financial reform in April or May of last year, it's hard to imagine what that effort would have consisted of, who would have organized on its behalf, and whether health care reform would have the equal chance of passing had it come to the forefront of the public debate now rather than in the spring.-- Tim Fernholz
