Financial reform is in the GOP's interest, too
WITH HEALTH CARE behind it, Congress seems likely to turn next to financial regulatory reform. As a matter of policy, this project is both necessary and complex. As a matter of politics, it would be difficult under the best of circumstances to achieve a bipartisan solution before memories of the financial crisis begin to fade -- much less by Memorial Day, as the White House wishes. Unfortunately, these are not the best of political circumstances.
The Senate Banking Committee has reported a bill on a party-line vote. This was something of a surprise, because, until the end, Republicans on the committee, with Sen. Bob Corker (R-Tenn.) taking the lead, were negotiating with their Democratic counterparts. What happened next is a matter of some debate, but it's clear that the process got caught up in an all-too-familiar dynamic of polarization. The Senate Republican leadership balked at a deal, and an exasperated White House pressed Banking Committee Chairman Christopher J. Dodd (D-Conn.) to pull the plug on his attempt to achieve consensus. It is very noteworthy that the Republican most deeply involved in the talks, Mr. Corker, characterized this outcome as "a strategic error" by his party.
Since then, the Obama administration has been sending clear signals that, on this issue, it believes it has the upper hand -- and that it is not going to let the banking lobby or the Republicans get in the way of a bill. "Be careful whose voice you listen to," Treasury Secretary Timothy F. Geithner warned an audience at the conservative American Enterprise Institute recently. Plainly, the White House has calculated that there are political points to be scored in November by advocating a measure that would create a consumer financial protection agency and shield taxpayers from "too big to fail" institutions -- and accusing the GOP of shilling for Wall Street. For its part, some Republicans calculate that the party can make hay by arguing that the bill is a formula for more bailouts.
Politically, the White House may well be correct. President Obama and congressional Democrats can afford to play hardball: If they get a bill that reflects mainly their ideas, they win; if the Republicans kill it with a filibuster, Democrats win anyway. This only makes the Republican leadership's apparent strategy that much more puzzling. By all means, the GOP should leverage its 41 Senate votes to obtain reasonable concessions on genuine issues. But it should not play the politics of no. And if the GOP does offer to bargain in good faith, even at this relatively late date, the administration should respond positively. Whatever the politics, contributions from both sides would produce the best -- and most politically sustainable -- financial regulatory reform for the country.