Healthy Skepticism

Yesterday commenters asked why I was so skeptical about financial reform legislation getting passed.  The White House threatened to veto any bill that didn't have derivatives regulation in it, while the Senate GOP vowed to filibuster the entire bill.

Why am I skeptical?  Because less than 12 hours later, Obama has blinked first.

In the face of stiff GOP opposition, Obama administration officials want Senate Democrats to purge a $50 billion fund for dismantling "too big to fail" banks from legislation that aims to protect against a new financial crisis. Republicans contend the provision would simply continue government bailouts of Wall Street.

A $50 billion taxpayer funded pool?  If that's the case, the Republicans have a point.  But it's not funded by the taxpayers:

One senior Treasury official said Friday that the fund for dismantling giant failing banks, which would be financed by large financial institutions themselves, is unnecessary. He said the costs of dismantling the firms could be recouped from the industry after a liquidation.

If the chairman of the Senate Banking Committee, Christopher Dodd, D-Conn., complies, that would remove one component of the bill that Republicans have persistently used to rally opposition. But it was unclear whether that step alone would yield any Republican votes.

Of course it won't.  There's no reason for Obama to give in on this to please the Republicans, they will continue to threaten to filibuster any legislation Obama tries to pass on anything (I thought we made this clear.)  But the banks don't want to pay the $50 billion into the fund, so the Frank Luntz talking point is suddenly a convenient excuse for the White House to ask the Dems not to be so hard on the banks and drop that particular requirement.

Gosh, it's almost like Obama's folding to the banks on this matter.  As the Republicans keep telling us about health care insurance mandates (well, they did last year when they still supported the idea completely) if people have "skin in the game" they're more likely to make smarter decisions.  Same with the bank bailout fund, which is why it's a good idea to create it.  The banks, not the taxpayers, would be fronting the money.

But no.  Now Obama is buying the GOP's idiotic talking point and asking for the Dems in Congress to take it out all of a sudden.

And people ask why I'm skeptical about real reform.  He's playing us again.  Mistermix at Balloon Juice has the right of it:

If you want to see why Senate Republicans are acting like sociopaths by putting financial reform at risk, just take a look at the Cook or Rothenberg House ratings. Rothenberg, for example, moved 44 seats toward the Republicans on Friday.

These moves are mainly driven by the release of first quarter fundraising numbers on April 15, which showed that Republicans are out-raising Democrats in key House races. Democrats won a lot of tough seats in the last election. Those incumbents need a lot of money to defend those seats, both for media buys and get-out-the-vote. In some key races, that’s not happening.

The audience for tea party rhetoric, and for Mitch McConnell’s endless filibusters, is Republican donors. If those people are convinced that the yahoo base will turn out in force, and that the rest of Obama’s agenda can be stopped, they’ll give big. Republican donors know that Republican control of the House, coupled with a constant filibuster in the Senate, will mean endless votes on HCR repeal, passage of watered-down financial “reform”, and little else.

And Obama is already caving in to please the bankers and to get financial reform off the front pages in order to keep it from being a fundraising opportunity for the Republicans.  He doesn't want a drawn out fight on financial reform, a Supreme Court nominee, immigration reform, or anything.  He's running scared from any sort of fight now.

And in the end that's going to be a disaster for the Dems.