Riffing off a post by Kevin Drum that calls for Obama to draw more on the FDR playbook, James Kwak makes a smart point:So far Obama has played the peacemaker, the reasonable man in the middle, the man who bridges divides. “My administration is the only thing between you and the pitchforks,” he said last March; note that he brought up the pitchforks, but positioned himself as the center, holding back the crazies.With financial regulation, there is no powerful force in Washington pushing for major change; Obama’s own Treasury Department is pushing for moderation. The closest thing the common man has to an advocate in Washington is Elizabeth Warren, and her job is chair of the TARP Congressional Oversight Panel. So financial regulation has become a negotiation between the centrists at Treasury and the banking lobby, which is an unlikely recipe for change. I’m no Axelrod, but it seems to me that taking a stand would be good politically, too; with unemployment likely going to be high in November, taking the side of the man in the street against the man in the glass tower couldn’t hurt.
I'm not as pessimistic about the content of the administration's proposals as Kwak; their clumsy political strategy and a reform-resistant Congress is a bigger concern -- a better description would be a centrist Treasury Department negotiating with a collection of alternately ignorant and anti-regulation moderate and conservative Democrats. But his point about interests is spot-on: There is no natural constituency of people who desire financial reform (besides the broad-but-hard-to-organize group of everyone not connected the financial industry). In fact, a comparison to health-care reform is useful, because the same logic applies: Everyone but the people in the health-care industry or those ideologically aligned with it would benefit form reform, but getting people to realize that and care about it required a combination of policy entrepreneurs and wonks like Jacob Hacker beating their drums for years about the policy and a progressive political coalition forming to support it over decades.
Meanwhile, financial regulatory reform became a top-priority issue almost overnight in the summer and fall of 2008, which puts reformers at a major disadvantage. There is a significant expertise gap (one that several groups are trying to rapidly fill with varying degrees of success) between the financial sector and reform. There also isn't much of a political coalition yet in terms of broad grassroots support, independent advocacy groups, and political leaders who want and need the support of the previous two groups.
Congressional Democrats are more than cognizant that they need to pass a regulatory reform bill to earn political points before the 2010 elections. The problem is that they're also cognizant that a broad majority of people in the country can't tell the difference between a cosmetic bill and one that actually fixes the problems with the banks, and that a significant minority of conservatives will be viciously attacking the bill no matter what happens. Those aren't incentives for good policy-making.
If there's anything we've learned from the major legislative initiatives of the past year, though, it isn't that the Green Lantern Theory of policymaking applies better to domestic policy than foreign. Rather, it's that the White House has not always had a particularly savvy legislative strategy. If Obama shifted his rhetoric to be more antagonistic to bankers, that would be politically useful for the president, but I'm not sure that it would change the policymaking environment. (Please, prove me wrong). What's needed is more legwork in the Senate to build a coalition that supports financial regulatory reform.
A nice opportunity will come when Senate Banking Chair Chris Dodd unveils his version of the legislation, which promises to go further than the House version. The president should publicly support that so that when the inevitable vote-getting compromises arrive, the final result won't be terrible. He should also definitely avoid the wishy-washiness we saw with the public option: He should be explicit about where he stands and make clear to senators who will need his help in 2010 that a failure to support those provisions will translate into zero turnout-increasing presidential campaign visits.
-- Tim Fernholz
[This painting of FDR is definitely my favorite presidential portrait]
