Feingold Will Vote Against Financial Services Reform Bill

Feingold Will Vote Against Financial Services Reform Bill

Feingold Will Vote Against Financial Services Reform Bill

Obama claims the legislation soon to be voted on in the Senate will prevent future financial meltdowns. But the Wisconsin Democrat says that simply is not the case.

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With three Republican senators (Scott Brown of Massachusetts and Mainers Susan Collins and Olympia Snowe) now signaling that they will vote with Democrats to enact new rules for how Wall Street and the big banks do business, President Obama says the country is on the verge of taking the steps necessary to prevent future financial meltdowns.

“What members of both parties realize is that we can’t allow a financial crisis like this one that we just went through to happen again,” Obama declared at a White House reception Tuesday. “This reform will prevent that from happening.”

But while Obama and Senate Democratic leaders may be getting more Republicans and conservative Democrats (such as Nebraska Senator Ben Nelson) on board –and will almost certainly have enough to pass the measure when it is considered in coming days — they won’t have the vote of the Democrat who has been the steadiest advocate for real reform.

No member of the U.S. Senate — with the possible exception of North Dakota populist Byron Dorgan — has been so consistent when it comes to opposing the demands of the Wall Street speculators and the big bankers than Wisconsin Democrat Russ Feingold.

A decade ago, Feingold was one of eight senators who opposed the repeal of the Glass-Steagall law, which in the aftermath of the stock market crash of 1929 had been enacted to erect a firewall between Wall Street and Main Street. The Wisconsinite warned then that this ill-thought-out deregulation would create instability throughout the economy, and he was right.

Two years ago, Feinfold was one of just 15 senators who opposed the Wall Street bailout that steered U.S. tax dollars into the accounts of the speculators.

During the current debate over how to reform the financial sector following the collapse of 2008, Feingold has repeatedly sought to strengthen regulations in a manner that will ensure against future collapses.

To that end, he has sponsored or co-sponsored:

*An amendment (which he co-wrote with Senators. John McCain, R-Ariz.ona, and Maria Cantwell, D-Washington) to restore the Glass-Steagall protections.

*A “too big to fail” amendment (sponsored by Dorgan), which would have required that no financial entity be permitted to become so large that its failure threatens the financial stability of the U.S. economy to such an extent that another bailout might be demanded.

*An amendment (sponsored by Sens. Sherrod Brown, D-Ohio, and Ted Kaufman, D-Delaware) that sought to set strict limits on the size of financial institutions.

*An amendment (sponsored by Dorgan) to ban the speculative bets known as “naked credit default swaps,” which played a major role in the current economic crisis.

*An amendment (sponsored by Senators Jeff Merkley, D-Oregon, and Carl Levin, D-Michigan) to prohibit banks with government-insured deposits from engaging in high-risk schemes, such as investing in hedge funds or private equity funds.

“Unfortunately,” as Feingold notes, “these crucial reforms were rejected.”

As such, the senator says, “While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.”

So Feingold will oppose the final version of the legislation, which was cobbled together by a House-Senate conference committee, and is being promoted by the Obama administration and Democratic leaders in the House and Senate as a cure-all for what ails the nation’s financial-services industries.

“As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis,” says Feingold. “The conference committee’s proposal fails that test and for that reason I will not vote to advance it.”

The senator has been right enough times to earn credibility as an analyst of what Congress can and should do to reform how Wall Street does business.

If he says the legislation “fails the test,” then it fails the test — and Obama should be cautious about suggesting otherwise.

Reasonable people may disagree about whether passing this bill at this time makes sense. Perhaps it is the best that can be gotten. But this mild measure, with its many compromises, will not "prevent… a financial crisis like this one that we just went through" from happening again."

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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