Congress responding to need for change


With passage of the financial reform bill in the Senate last week, President Obama’s agenda shifts into a new gear. The event seemed just a ripple compared to the titantic struggle over health care that finally concluded in March, but there were reasons for that.

Notably, Republicans have given up the scorched-earth opposition that forced Senate Democrats to vote in lock-step. The GOP first dropped its filibuster to let financial reform be debated, and amended, and then four of them, including Maine Sens. Olympia Snowe and Susan Collins, voted for it, while two Democrats were opposed. Both Snowe and Collins had voted against health care, even though Snowe favored a virtually identical measure in the Finance Committee.

In short, the political system is functioning more normally. Partisan differences are inevitable, but usually not the only consideration. The health care bill was weakened substantially because only Democrats supported it.

Financial reform, by contrast, got better and stronger en route. Because of the Senate’s more open amendment process, it was able to strengthen provisions on the derivative trading that played such a big part in the September 2008 financial collapse. Amendments also beefed up requirements for the credit-rating agencies that were stamping risky investments with AAA ratings, installed higher capital requirements for banks and restricted credit card fees.

Not every amendment will survive a House-Senate conference, but most will, since they come from constituents, not lobbyists.

Before it’s done, the House will probably give up the “bailout fund,” financed by banks, that proved so unpopular in the Senate. While deposit insurance is still a good idea, regulation is a better way to keep banks themselves from taking undue risks. And the Senate will likely give up the odd idea of housing a new consumer protection agency at the Federal Reserve. The Fed is a central bank, with layers of secrecy and isolation built in. Consumers need swift recourse, as anyone who’s filed a complaint in recent years can attest.

Some of the looser regulation of the past three decades will remain. The bill does not try to get banks out of the investment businesses, for instance. It does not, at this point, create a “too big to fail” standard that would cap the size of institutions. But it does go a long way toward righting the balance between borrowers and lenders, and between banks and other kinds of businesses, that had gotten seriously out of whack.

I remember the day, now years ago, when a banker was explaining why it was OK for Maine to repeal its “usury law,” which limited the interest charges banks could impose. I was assured banks would “never” exceed the 18% limit then in effect. Now, banks are charging 25%, 30% or even 35%, and that’s before we even get to late fees. There goes Alan Greenspan’s big idea that the financial sector is “self-regulating.”

So what, aside from making Congress safe for moderates, does all this mean? Financial reform is mostly about restricting lending at the margins and averting another meltdown – important but limited goals.

In short, passage of the second major pillar of President Obama’s initial agenda makes it more likely we will also see the third – the energy bill.

Yes, this is supposed to be impossible, but that’s partly because of the perceived imbalance between the coal and oil giants who dominate the industry now, and the alternatives we know we must pursue, possibly for our own survival.

That calculation was made before the events of April, when another Massey mine blew up in West Virginia, killing 29, and the BP Deepwater Horizon rig exploded in the Gulf of Mexico, killing 11 and creating a mammoth oil spill that could easily be the largest ever.

These disasters create unmistakable evidence, easily understood, that the cost of our fossil fuel addictions goes far beyond the price at the pump or the meter, or even the repeated Middle East wars we’ve fought.

When the Senate turns to energy, it should also act to improve the legislation, such as scuttling the subsidies for coal and petroleum that the House felt compelled to include. Maine’s moderate senators seemed sure to vote for energy reform even before April, but now others will join them, enough to balance the coal and oil states that will protect those interests.

There are moments in history when there are clear signs we must change our ways, difficult or impossible as that might seem. This is one of those moments.