Financial reform bill another win for Obama, but will the public care?
Following the Recovery Act and health-care reform, the newly approved financial reform bill shows that President Obama is adept at getting his agenda through Congress. But the American public cares about one thing right now: the economy.
At a minimum, this latest success demonstrates that Mr. Obama and his team know how to work their big majorities in Congress and get things done. This is part of the spoils of the resounding Democratic sweep of 2008, which handed Obama the White House and large caucuses in the House and Senate.
But big majorities are diverse, and, as the Democrats discovered with health care, getting agreement – and votes – can be like herding cats. Especially in an era of intense polarization, that requires 60 votes in the Senate to pass anything big. The Democrats got three Republican senators to join them Thursday in voting for financial reform, a victory in and of itself, as it passed 60 to 39.
Obama’s success in passing financial regulatory reform, just a few months after health care, also puts the lie to the idea that major legislation can’t pass in an election year. Democrats know that the days are probably numbered for their big majorities, and that they had to act soon if they wanted it to have a shot at passage. Democrats are also hopeful there’s room in the schedule for one more biggie: energy reform.
So what does the president gain politically from passing financial reform? Long term, if the reforms are indeed credited with preventing another collapse of the financial system, then history will view Obama and Co. favorably. But it’s hard to prove a negative.
Short term, Obama gets... not much.
“For most people not clued into politics, there’s only one issue: the economy,” says Larry Sabato, a political scientist at the University of Virginia, Charlottesville. “Basically, people are judging Obama by the shape of the economy, which is still very bad.”
Obama sold his biggest legislative initiatives as fixes for the economy, and by reelection time in 2012, voters may recognize them as accomplishments, because the economy should be doing better, Mr. Sabato says. “But right now,” he says, “all they know is the economy’s still bad, so what good to them is the stimulus, financial reform, even health care?”
Furthermore, the content of the 2,300-page financial reform is confusing to many people. This means Obama and the Democrats have their work cut out in explaining and selling it to the public – just as they have tried to do with health-care reform. Republicans will work just as hard to spin financial reform as a disaster. The bill, which Obama is to sign next week, creates a body within the Federal Reserve aimed at protecting consumers, oversight of the derivatives market, and a way for the government to take over and dismantle failing financial firms.
The public relations battle started moments after passage. Thursday afternoon, fresh from an economic speech in Michigan, Obama touted financial reform from the south driveway of the White House – beginning with what the reform means for average Americans. Included are protections to consumers on mortgages, credit cards, and student loans.
“All told, this reform puts in place the strongest consumer financial protections in history,” Obama said. “And it creates a new consumer watchdog to enforce those protections.”
Speaking of “Wall Street’s mistakes,” Obama also promised that there will be “no more taxpayer-funded bailouts, period."
Republicans reacted just as quickly with a dramatically different take.
“Anyone who claims this bill ends bailouts and too-big-to-fail is simply wrong,” said Rep. Tom Price (R) of Georgia, chairman of the Republican Study Committee. “Washington will now have broad, permanent authority to bail out failing companies with taxpayer money. And Fannie Mae and Freddie Mac, the insolvent entities still benefiting from the biggest taxpayer bailout of all, are not even addressed.”
Critics also argue that the law will result in tighter credit right when the economy needs credit most. How the law plays out in practice, analysts say, will depend on regulations that have yet to be drafted.