Sherrod Brown’s “Radical” Banking Reform Ideas (That Most People Support)

Reporting on Politics and Policy.
May 12 2014 8:57 AM

Sherrod Brown’s “Radical” Banking Reform Ideas (That Most People Support)

A rad dude.

Photo by Brendan Smialowski/Getty Images

Deirdre Shesgreen takes the early pulse on bank lobbyists who expect—pending the 2014 midterm results—that Ohio Sen. Sherrod Brown will run the Banking Committee come 2015. It's a good, underreported story, this quick rise of young senators in an era of retirements and primary defeats. Sen. Patty Murray* and Sen. Ron Wyden have taken over Budget and Finance, respectively, from two Democrats who were much more vulnerable to Republican challenges and much more intimate with business lobbyists. (Compare the post-Hill careers of former Wyden staffers with those of departed staffers for his predecessor, former Sen. Max Baucus.)

And the story's got a headline that Brown can't mind seeing: "Wall Street wary of Brown as banking committee chairman." Wall Streeters, who prefer to whisper anonymously to reporters as they make lobbyists rich, are not quoted in the story. Instead, we are told that Brown's goals range "from boosting affordable housing to cracking down on risky financial practices," and we are told why this is radical.

“He has radical views on what the banking sector should look like,” said Tony Fratto, who works for Washington consulting firm Hamilton Place, which represents large financial firms, including banks.
Fratto, a former U.S. Treasury official in the George W. Bush administration, said Brown wants to “break up large American banks and put them at a competitive disadvantage.” And if Brown becomes chairman, Fratto predicted, he will “pile on more regulations.”

A few grafs later we learn the identity of one such radical regulation: a bill, co-sponsored by Republican Sen. David Vitter, that would require banks with more than half a billion in assets hold at least 15 percent in capital. Vitter is running for governor of Louisiana next year, and it's hard to believe he'd endorse some radical Marxism on the way to that election.

We don't, sadly, get to see any polling on Brown's "radicalism." That's a shame, because it debunks the bankers. In a YouGov poll last year, 61 percent of respondents said that the major banks were too big, and by a 16-point margin they favored breaking them up. Around the same time, a Bloomberg poll of investors found that 60 percent considered the banks too risky, and a plurality favored reducing their size.

"Breaking up the banks" is a paradoxical political message. It polls well; it's also easily characterized as wild-eyed radicalism, #Occupy stuff. In The Payoff, his memoir of a career in Washington that ended on the staff of Delaware Sen. Ted Kaufman, Jeff Connaughton remembered how nervous some Democrats were made by a 2010 Brown-Kaufman amendment to break up banks. When told of the amendment's effect, California Sen. Dianne Feinstein literally gave it a thumbs-down. "This is still America, isn't it?" she asked a colleague, rhetorically.

At the very same time, the Senate was approving a toothless amendment, sponsored by Sen. Barbara Boxer, to put Congress on record against further bailouts. Boxer was running for re-election and knew ideas like these were popular; Feinstein, safe from voters until 2012, did not want to hear it. It's actually a very thin line, between an idea that's too popular not to support and an idea that can be branded "radical" by lobbyists and their allies in the press.

*Like my former colleague Matthew Yglesias predicted, Murray, by taking over from North Dakota's Kent Conrad, drove her committee away from the Pete Peterson consensus and over to Obama-ian liberalism.

David Weigel is a Slate political reporter. 


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