Democratic Sen. Russ Feingold not only refused to support the financial-reform bill that President Obama signed into law yesterday; he also refused to support an up-or-down vote on the legislation, joining the Republican filibuster. At the time, I had some harsh words for his decision. Now, a group of scholars have done some data analysis and come to an interesting conclusion: Feingold "let principle get in the way of making the bill modestly more progressive. Ironically, by refusing to support a bill that he considered too modest, he ensured that the bill would be more conservative and favorable to banks."Their analysis identifies the pivotal vote -- in this case, Massachusetts Sen. Scott Brown -- and notes that if Feingold offered merely to support an up-or-down vote while still opposing the bill itself, Brown's negotiating position would have been weakened, perhaps preventing several loopholes from getting into the bill. The scholars choose to focus on the bank tax that the bill's managers removed in the face of Brown's objections, but as Barry Pump notes, it was likely that other key Republican votes would have objected to the bank tax.
But what both the scholars and Pump forget is that though Republicans generally opposed a tax on the banks, Brown obtained several Massachusetts-specific loopholes in the Volcker rule. That provision was intended to block banks from speculating with their money through trading or owning hedge or equity funds, but thanks to Brown, banks can still invest substantially in the latter. Had Feingold offered his vote, or merely to help kill the Republican filibuster, it's possible that these carve-outs might not have been needed, since the Maine Republicans did not seem invested in weakening limits on bank risk.
Of course, this is armchair quarterbacking, er, vote-counting, but the analysis offers a compelling case that Feingold weakened the bill through his procedural objections. In the knife-edge Senate, Harry Reid would have a much stronger negotiation position with Feingold's support. Now, as then, it is a shame that by joining a filibuster to ostensibly protest weak reform, Feingold weakened it further.
-- Tim Fernholz
