Washington is experiencing a rare and disorienting moment. Big ideas for financial reform that have languished for years are suddenly gaining momentum.
Instead of taxing folks to clean up after reckless Wall Street bankers, why not tax Wall Street?
Instead of tolerating behemoths regarded as “too big to fail,” why not break them up before they do more damage to the country? Instead of genuflecting before the mysterious Federal Reserve, why not strip the temple of its secrets and cleanse it of the self-interested bankers who shape Fed policy?
The fact that these and other unsanctioned propositions are in play and even proposed by respectable figures indicates how deeply the established order has been rattled by the financial crisis. It also demonstrates that members of Congress who bailed out the bankers with public money are quite terrified of voter retribution in the next election.
The most startling evidence of reversal is Chris Dodd, chair of the Senate Banking Committee, long a loyal friend of Wall Street. Dodd proposes to strip the Fed of its regulatory functions because of its “abysmal failure” to protect the public, and to replace it with a regulatory administration. Dodd is no doubt motivated by his weak prospects for re-election next year. Still, he earns courage points for violating the longstanding taboo against criticizing the central bank.
Taxing Wall Street is a more provocative departure, but some representatives are warming to the idea, drawn to Oregon Rep. Peter DeFazio’s appealing Let Wall Street Pay for Wall Street’s Bailout Act (HR1068). A very small excise tax on all financial transactions could yield hundreds of billions in revenue. House majority whip Jim Clyburn suggests the securities tax is “a painless way” to pay for highways. Clyburn asks, “If you’re Goldman Sachs, if you’re making all this money, if you got all this federal money [in a] bailout, and you are paying all these big bonuses to your folks, where is your contribution to this recovery?” Good question.
Senator Bernie Sanders asks another one. If some banks are “too big to fail,” why not just make them smaller? His bill would require Treasury to identify and break up too-big financial institutions within one year.
The president wants to govern from the center, but the center keeps moving leftward on him. If he doesn’t catch up soon, he’ll be in trouble.
– William Greideris writes for The Nation magazine.
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