As senators came to the floor Thursday night to pass the financial-reform bill, New York's Chuck Schumer strolled up to his colleague, Chris Dodd, and slapped his cheeks playfully with both hands, as if to rouse the weary legislator. It wasn't just the late hour. As chair of the Banking Committee, Dodd has spent the last seven months in constant negotiation and weeks managing the bill on the floor.
With versions of the bill now approved by both houses of Congress, all that remains to pass the effort is a conference committee to reconcile the bills, and final votes in the Senate and House. While key details differ in each chamber's version, they are philosophically close enough that some version of these reforms will pass, and the result will represent a significant shift in the status quo.
Yet many recognize that the bill does not go far enough in fundamentally shifting the way Wall Street or the broader financial sector do business. In part, that's because a compelling vision of what that would look like has yet to be articulated. Simply advocating for smaller banks, a smart proposal, is not a fundamental reimagining. Nor is advocating a return to the banking system the United States developed in the 1930s. While we need to learn from New Deal reforms, applying them wholesale to modern finance is too simplistic a response to failure.
Yet only a few policies progressives sought are explicitly absent from the bill: A return to Glass-Steagall, size caps on banks, an explicit ban on naked credit-default swaps (buying speculative insurance on bonds you don't own), and tighter rules around regulatory exemptions. Other ideas progressives support -- bans on proprietary trading and hedge funds at financial institutions, higher capital and leverage standards for banks, strong new consumer protections, safe and transparent derivatives rules -- are already in the bill but often bogged down in regulatory discretion.
This is where learning from health-care reform, the other signature legislation of this Congress, is instructive. On Friday, Jeff Blum, the chair of Health Care for America Now, the central grass-roots coalition advocating for health-care reform, and Ethan Rome, its executive director, stopped by the Prospect's offices to talk about their past work and, perhaps more important, what comes next.
A contrast with financial reform is instructive: While health-care reform has been a touchstone of the Democratic Party and the broader progressive coalition for decades, financial reform only rose to prominence after the crash of 2008. While fixing health care was a major campaign issue, financial reform was a scramble in reaction to shifting events; most progressives had the barest grasp of how to talk about what policies were appropriate.
"Progressives have roughly three decades of extensive common history [on health care]," Blum says. "On, say, financial reform or job creation, there isn't that much common history."
Blum and Rome helped assemble a huge coalition of partners that included labor unions, community organizations, policy institutes, and civil-society groups. It had a $51 million budget, 20 full-time staff, and a field organizing program in 44 states. By contrast, the largest financial-reform coalition, Americans for Financial Reform, is less than a year old and has a budget of a few million dollars. That a bill this strong is coming through the process is a testament to doing more with less and to the political salience of this issue in the wake of the bailouts.
Even after Congress and the president complete the final steps in passing the Wall Street overhaul, though, that shouldn't be the end of the conversation. Just as Blum says of health-care reform that "we need to make sure that the law fulfills its promise, make sure the movement that we back fulfills its promise," the same should be done for financial regulation. Those who seek a banking sector that provides sustainable capital for the economy and not a roulette wheel need to be prepared to organize around rulemaking and nominations.
For instance, HCAN has recently focused on the implementation of the health-care reform legislation. Two weeks ago, Rome says, the group helped 25,000 activists provide public comments to the Health and Human Services Department on a relatively obscure rule the department was crafting under the bill's authority. The public-comment period is typically taken advantage of by lobbyists and industry stakeholders, so inserting the voice of citizens concerned with the common good has the opportunity to shift the playing field.
The same approach should be taken by bank reformers. Regulators will consider some 18 studies commissioned in the bill and figure out how to write rules that apply bans on proprietary trading, higher prudential standards for the banks, and the like. Similarly, picking regulators at the various offices -- including this summer's chance to nominate a new national bank regulator at the Office of Comptroller of Currency -- should be a focal point for activists.
"The important fight is making sure the administration holds the industry accountable," Rome says.
It will be all too easy for progressives to throw up their hands, disappointed with this bill and the banks. That does this legislation a disservice -- it provides a strong framework for future action. Governing, though, does not stop with the president's pen. New structures will be in place, and they can be leveraged on behalf of the public interest as well as private concern.