Indisciplined Democrats vs regulatory reform

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Felix Salmon

Barack Obama ran what was arguably the most disciplined and on-message presidential campaign in history. But all that the Republicans need to do right now to ensure that financial regulatory reform never happens is sit back and watch the Democrats fight each other to a bloody stalemate. It’s inconceivable that the GOP would ever allow itself to get into a mess like this.

I don’t think anybody anticipated this turn of events back in June, when we saw the first relatively detailed Treasury proposal on the subject. Sure, there were a lot of problems with it, but it was necessary, the Democrats had control of both houses of Congress, and at least it was something. What’s more, insofar as there were weaknesses in the proposal, they were generally a direct consequence of the fact that Treasury had been careful to put together a proposal which could pass political muster.

Except, Treasury’s finely-honed political calculations turned out to be somewhat awry: it wasn’t long before Barney Frank was tearing into one of the key legs of the proposal, removing bothcommunity banks and the vanilla option from the Consumer Financial Protection Agency.

And then Chris Dodd came along, with his own set of entirely idiosyncratic ideas: where Treasury put the Fed at the center of the regulatory nexus, for instance, Dodd wanted to remove from that role entirely. And where Treasury soft-pedaled on regulatory consolidation, for fear of angering powerful constituencies, Dodd went much further, combining not only the Office of the Comptroller of the Currency with the Office of Thrift Savings, but throwing in the Federal Deposit Insurance Corporation for good measure.

Indisciplined Democrats vs regulatory reform

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