Should the Senate slow down on financial reform?

Mike Riggs Contributor
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In today’s DC Morning, I raised the point that Democrats are rushing financial regulatory reform. As evidence, I cited Jon Ward’s story from this morning:

President Obama tried Monday to portray the Senate’s vote on financial regulation as a simple, black and white case of Republicans blocking needed progress on Wall Street reform.

But not many lawmakers – even those who voted to move forward Monday and those who want to vote for the bill – were buying the argument. And in fact, one Democrat joined with Republicans to vote against the motion to move to debate.

The White House shot out a statement from Obama soon after Senate Majority Leader Harry Reid, Nevada Democrat, failed to attract the 60 votes necessary to move forward with debate of the bill. The bill fell short by a count of 57-to-41.

“I am deeply disappointed that Senate Republicans voted in a block against allowing a public debate on Wall Street reform to begin,” Obama’s statement said.

But key lawmakers stepped on his message, indicating what informed observers have known and most senators have said all along: Republicans and Democrats are both in favor of reform and are working hard to resolve remaining differences, which are complicated and may take some time to work out.

“It wasn’t necessary to have a vote today. Discussions are going along in good faith,” said Sen. Olympia Snowe, a Maine Republican who the White House had hoped might defect from the GOP to help Reid push the bill through to the debate phase.

I also pointed to a Daily Beast column by Center for American Progress blogger Matt Yglesias, who argued that moving the bill too quickly posed problems:

It means we’re looking at a bill that punts on many of the biggest issues. It means that neither the broad public nor the narrower circle of policy elites and experts and semi-experts have a firm grasp of the relevant questions. And this in turn means that we’ve got a bill whose main premise is that we need to trust the same institutions and many of the same people who were arguably responsible for the crisis in the first place. Progressives are basically left to hope that Tim Geithner knows what he’s doing.

Yglesias then contrasted the health care bill and the financial regulatory bill, and noted that health care didn’t get better (from a progressive perspective) with time. He says that financial regulation could suffer the same fate if dragged out for ages (mainly he thinks it could be eviscerated by financial lobbyists), but that rushing it is no better:

On many aspects of financial regulatory reform, there’s no real consensus among reputable analysts about what should be done. Is the existence of big banks a problem, or does Canada’s stable and highly concentrated banking system prove that it’s a red herring? Should we fix the ratings agencies by regulating them more stringently, or do we need to deregulate and increase competition? What should happen to Fannie Mae and Freddie Mac? Given that we need to limit leverage, how much should we limit it before we start adversely impacting growth?

The bill substantially punts on these questions, either not addressing them at all or else merely instructing regulators to come up with an answer. In part, that’s what speed required. And in part it’s the inevitable result of a process driven by technocrats rather than lengthy congressional deliberation. Which means that we’re looking at a bill that basically gives regulators the tools they say, in retrospect, they would have needed to prevent the crisis. That’s a pretty good idea, but it naturally raises the question of why they didn’t ask for these tools at the time. Instead of having a far-reaching debate that touches on the fundamental role of finance in our society and the relationship of banking to government, we’re updating the regulatory toolkit.

As this is the first time that the Senate GOP and Yglesias have agreed on ANYTHING, perhaps the Senate Dems should slow the hell down.