Like me, Kevin Drum read Jim Manzi's positive reaction to the Administration's modern twist on Glass-Steagall and briefly thought that Republicans might see the wisdom of the approach and sign on to the legislation. Unfortunately, they've already voted against this proposal. Both ideas the president articulated yesterday -- stopping certain kinds of risky trading and capping the size of the banks -- are actually already in the financial reform legislation passed by the House, albeit at the discretion of regulators instead of as mandated rules. (Indeed, yesterday's major change was simply removing discretion from the mix). The proposals came as amendments authored by Reps. Paul Kanjorski, Brad Miller and Ed Perlmutter, and each one came under strong criticism from Republicans -- Republicans and Blue Dogs voted against [PDF]Kanjorski's size-cap amendment; the Miller-Perlmutter amendment that permitted regulators to ban proprietary trading passed by a voice vote but with conservative criticism; and the entire financial stability bill was passed out of committee on a party-line vote [PDF]. If Republicans objected to these provisions, which would have likely not been implemented at all or at most implemented sparingly, it is hard to believe they will support them as hard-and-fast rules. Not a big deal in the House, perhaps, but getting this through the senate will be hard -- but the president should push on anyway, because failing to pass the legislation could turn into a political win.
-- Tim Fernholz
