Following up on yesterday's comments about the GOP's approach to financial reform, we now have the GOP's alternative, kindly posted [PDF] by Matt Yglesias. He aptly summarizes the situation: The proposal has strong structural similarities to the Dodd bill, especially on resolution authority and regulator's resources during a crisis, but it guts a number of key provisions, most notably on increasing prudential standards, executive compensation (not even mentioned), meaningful consumer financial protection, securitization rules, and ratings agencies reform.
So, there are a lot of differences, and important ones at that. Still, there's a school of thought that suggests the similarities between the two parties' efforts indicates a complacency on the part of the Democrats.That view misreads the situation, and not just because of the momentum behind two seriously progressive amendments to the bill in Sen. Blanche Lincoln's Wall Street derivatives ban and the Kauffman-Brown bill, which TAP editor Harold Meyerson likes to call a return to the Democratic Party of "Jefferson-Jackson."
At the beginning of this process, the Democrats have had the rare opportunity to put forward a set of substantial reforms -- which is true even if you think they don't go far enough -- which are politically popular. Republicans have begun to concede that this bill will pass in some form; it will likely be a victory for the Democrats, and Republicans recognize as well as anyone else that their view of political economy basically prevents them from doing anything meaningful.
It makes sense that Republicans would adopt the most commonsense provisions of the Dodd bill, water them down, and claim them as their own so as to gain some credit. Particularly on the issue of resolution authority, many Southern and Midwestern conservatives are as reflexively populist as the Fed chairs from that reason -- hence the similarity between the big bank liquidation provisions. it doesn't surprise me that I'm hearing Sen. Bob Corker influenced this document heavily.
Today, at 12:20, we'll have our third and hopefully final cloture vote to give Sen. Chris Dodd's financial reform bill a chance to move onto the Senate floor and go through the amendment process.
-- Tim Fernholz
