This week, Sens. Sherrod Brown and David Vitter are introducing a bill designed to make failure by the big banks less likely, in order to defend our economic system from another 2008-style meltdown. As the two senators put it, the measure would “ensure that all banks have proper capital reserves to back up their sometimes risky practices — so that taxpayers don’t have to,” while requiring that the largest banks “have the most equity, as they should.”
The banks are already arguing that this is a bad idea that will hamper economic growth. Matthew Yglesias has a good post explaining why this argument is bogus and why such a measure is indeed needed to safeguard the economy.
All of which raises a question: Is it possible that a genuine and broad left-right populist alliance can come together against the banks around this legislation?
In an interview with me, Senator Brown laid out his case for why he believes the conditions for such an alliance against “too big to fail” are ripe right now. Two key reasons: First, there appears to be a rising belief among some conservative opinion leaders that the GOP needs to achieve distance from Wall Street. Second, the Senate Democratic caucus is more liberal and populist than it has been in years.
“In this new session of Congress, you’ve seen conservative columnists and pundits call on Republicans to break their ties with Wall Street and start fighting for Main Street more,” Brown said, pointing to recent columns by George Will and Peggy Noonan as examples. Meanwhile, Brown noted, the new influx of more liberal Dems into the Senate, such as Tammy Baldwin and Elizabeth Warren, has shifted the caucus to the left.
“This class is a more populist class than we’ve seen in several cycles,” Brown said. “Even more conservative members like Joe Donnelly and Heidi Heitkamp have a streak of populism.”
To be sure, right and left come at this from different directions. Conservatives rail against government bailouts of Wall Street and “crony capitalism,” while liberals want better regulation of Wall Street to protect the middle class and avert future disasters that would require taxpayer-funded rescue efforts. But this creates a space for an alliance around the idea that “government should not pick winners and losers,” as the two Senators put it.
Of course, Brown is under no illusions as to how hard it will be to get their measure through the Senate Banking Committee, let alone the Senate itself. “The Banking Committee is a pretty conservative body on both sides,” Brown allows, adding that various legislative strategies are currently being hashed out.
But Brown points to several bright spots. For instance, A previous version of this legislation introduced by Brown in 2010 failed with only three Republican votes, but now, Brown says, he and Vitter are in discussions with no fewer than 10 Senate GOP offices. What’s more, Brown adds, given growing public awareness of Wall Street’s role in creating the economic crisis, “even middle of the road Democrats are looking at this.”
Brown notes, however, that it would be helpful if more top shelf liberal columnists devoted some attention to the measure. “It’s important that progressive columnists weigh in on this more,” Brown says. “It’s important that people who care about progressive politics rally around this.”
“Democrats should embrace this because it’s better for middle America,” Brown continues. “The economy would get better with a more stable financial system, which means more opportunity for working class guys to get ahead. It will help prevent a repeat of 2008. Progressives care about these issues more than anybody.”