On Thursday, the U.S. Senate passed a financial reform package that
includes a handful of important reforms, but it won't fundamentally
change the relationship between banks and society. Wall Street still
has a vice grip on our economy, and lawmakers still find it very
difficult to stand up to bigwig financiers.
The real fight for our economy will involve future legislative
battles with bankers. Winning those battles will require sweeping
action by engaged citizens. The good news is, critical progressive
mobilization is already happening. Public outcry helped fuel the fire
for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall
Street reform bill he pushed through the House last year would have
been much stronger in today's atmosphere of outspoken economic unrest.
Focus on the Fed
So what's good about the bill the Senate just passed? As Annie Lowrey
explains for The Washington Independent, the Federal Reserve's
emergency lending programs will finally be subjected to public scrutiny.
The Fed served as the U.S. government's chief bailout engine during
the crisis. It injected trillions of dollars into the banking system
without any oversight. We still don't know who got the vast majority of
that money, or what collateral the Fed accepted in return. There are
all sorts of potential scandals, ranging from sweetheart deals the Fed
cut with hedge funds to the trillions of dollars in loans to megabanks
with no strings attached.
Of particular interest are the "Maiden Lane vehicles"-programs the
Fed devised to purchase or guarantee assets from Bear Stearns and AIG.
These were explicit bailouts for individual firms. We know almost
nothing about the Bear Stearns bailout, and what little we do know
about the AIG bailout is unsavory to say the least- big bonuses for
AIG's employees, with little or no effort to limit the impact on
taxpayers.
Reconciliation
There are still a handful of important fights as the House and
Senate iron out the differences between their respective versions of
the bill. As I emphasize for AlterNet,
a host of major issues are still on the table, including consumer
protection rules and fixing the derivatives casino. These changes could
be gutted entirely or dramatically strengthened during negotiations
between the House and Senate.
The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times,
the Democratic leadership has been trying to both establish meaningful
reforms and simultaneously maintain its campaign finance relationship
with megabanks. Republicans have almost universally attempted to block
any reform altogether.
Regulators will get a handful of important new tools, including the
authority to shut down complex banks on the verge of collapse, the
ability to monitor derivatives and a have new set of powers to protect
consumers. That's all good, but we'll still be living with
too-big-to-fail behemoth banks that engage in reckless trading and
exploit consumers.
Engaging activists
That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation,
that business is not going to be accomplished without serious,
organized progressive activists putting pressure on political leaders
to act in the public interest, rather than the interests of the
corporate class.
When the country suffered a trauma that massively
discredited the establishment rulers, the Democratic Party became the
establishment. And progressive groups in DC, under stern White House
orders not to cause trouble (don't show up at his door! he's a donor!
we might nominate him for something!), descended into what one
organizer calls "grotesque transactionalism" . . . . If we're going to
get reform on the scale we need, bank lobbyists and members of Congress
alike have to be confronted with the terrifying thought that the system
from which they profit might just be run over-that 700 angry protesters
might show up on their lawn.
As Hayes details, Bank of America lobbyist Gregory Baer woke up last
Sunday with exactly that- 700 protesters in his front yard. That kind
of pressure gets results. It took Franklin Delano Roosevelt seven years
to enact his New Deal financial reforms. Earlier in the 20th Century,
it took more than a decade for public opinion to align itself with the
corporate crackdowns pushed by Republican President Theodore Roosevelt.
It's reasonable to expect the fight for fair finance to take more than
two years, and important to fight hard for it.
The minimum reforms are already clear. Essentially, we need to bring
banking back to the model that persisted from the 1930s into the
1980s-an era with no serious financial crises or bailouts. Our current
financial woes stem from the systematic dismantling and deregulation of
this system over the past 30 years.
State-run banks?
But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine,
the state of North Dakota has been largely insulated from much of the
fallout from the financial crisis of 2008. Part of the reason for the
state's relative stability lies in the fact that it operates its own
bank.
North Dakota's direct supervision of one institution among the
hundreds of banks that operate in the state has helped insulate it from
the credit storm on Wall Street. The state has its own engine of
credit, and can keep funds flowing to businesses that need it, even in
the middle of a crisis.
The prospect of state-run banking may seem radical, but it isn't.
It's a practical proposal based on the established, real-life success
of the Bank of North Dakota. As Brown notes, five other states have
legislation pending that would create their very own
banks-Massachusetts, Virginia, Washington, Illinois and Michigan, while
Hawaii recently approved a study to determine the usefulness of a bank
run by that state.
The financial reform bill the Senate just passed was a good start,
but we've got a long way to go. We're not going to get there without a
committed community of progressive activists who demand that the
economy serve society, not only entrenched corporate interests.
