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Playing with Fire

A Commentary By Susan Estrich

Wednesday, April 28, 2010

Republican senators are playing with fire. And Senate Majority Leader Harry Reid is perfectly content to pile on the logs.

It's hard to see how you argue against stricter financial regulation of Wall Street risk-taking, at least outside of closed-door sessions with Wall Street leaders -- like the one Republican Sens. Mitch McConnell and John Cornyn had earlier this month with about two dozen financial executives.

The purpose of that meeting, at least according to press accounts, was to figure out how to water down the Democratic financial reform bill that Republicans voted unanimously on Monday not even to allow to come to the floor.

In the meantime, the Democrats are making news by holding public hearings to showcase the lengths to which Wall Street went to make sure that while millions of Americans were losing their savings and their jobs, the big banks were making money by playing both sides of the game.

Of course, playing both sides is how investment banks operate. But the rules require that they at least disclose that to their customers, even if most of us would know where to look to find that information.

But this is about politics right now, not financial disclosure. And frankly, politics is a lot easier to decipher.

The Democrats understand that they have a winning issue right now. Goldman Sachs is making money. Bonuses are back, if they ever went away. The same folks who made obscene amounts of money taking risks that taxpayers ended up covering are still making obscene amounts of money, even as they fight against regulation that would try to prevent another collapse by providing stricter oversight and greater protection for consumers.

You can babble all you want about "big government" being bad and too much regulation squashing free enterprise, but this is not 1980. This is not about higher taxes. This is not health care. Most Americans were pretty happy with their own health insurance plans and worried that reform could cost them more or give them less. I haven't met anyone lately who's happy with how their IRA is doing. I haven't heard anyone on Main Street singing the praises of Wall Street, defending reckless packaging of risky investments put together for the sole purpose of ensuring short-term payoffs for the people who sold them.

The Republicans are fighting an uphill battle, politically speaking. Listen carefully, and they'll say that they aren't really against reform legislation; they just want to have some closed-door meetings to change (translate: weaken) the Democratic bill before it comes to the floor. Of course, they could have an open debate and make those changes publicly. But no, they want a deal first.

Am I the only one who remembers when they were raising all kinds of heck about the Democrats meeting behind closed doors to work out a deal on health care before they brought that bill to the floor? The argument worked, by the way; it was an important piece of their successful public campaign against health care reform. Now anyone who watches Washington carefully knows that consistency is a talking point and not a principle in politics. But it's a pretty good talking point.

The Republicans' unwillingness to even have an open debate about financial reform makes them look like Wall Street really did get its money's worth from them. Sure, the Democrats get money from the bankers, too. (Who else can afford these $35,000 dinners, after all?) But the big question is not who gave what to whom, but what they got for it.

Reid has made clear that he's going to keep scheduling votes to take up financial reform, daring Republicans to keep voting as a bloc to stop it. Either one or more Republicans defect, in which case the rest of them look bad, or they all stick together, in which case they all look bad.

With thanks to my brother for correcting me: Heads they lose; tails Democrats win.

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