Wall Street Reform Takes A Populist Turn

Anti-Wall Street sentiment is so strong and Republicans have such a weak hand that Democrats in the Senate are suddenly finding themselves strengthening the financial reform bill with new amendments and beating back GOP attempts to weaken it.

The latest evidence of this populist surge is that the Senate is now expected to adopt an amendment, authored by Sen. Bernie Sanders (I-VT), that will require an audit of all of the Fed’s emergency lending activities, starting in late 2007.*

Sanders’ success in winning support for his amendment is emblematic of the greater debate over financial reform, which has, thanks to the Democrats’ aggressive political posture, and the unpopularity of Wall Street, been much more favorable to progressives, even over the objection of powerful interests.

The Sanders measure is similar to a Fed audit proposal that was included in the House’s financial reform legislation, which passed last December, and should simplify the process of ironing out the differences between the two bills in a conference committee.In order to break White House opposition, Sanders agreed to limit the scope of the Fed audit to the Fed’s emergency lending activities–excluding some of the transactions the Fed engaged in to limit the scope of the 2008 financial crisis.

Separate from Audit the Fed, the Senate is still set to consider a series of other amendments to strengthen rather than weaken the bill, and the prospects for those are better than they have perhaps ever been. They include limiting the size of major financial institutions and restoring firewalls that used to exist between banks and other financial institutions.

Currently, Democratic leadership is hoping to consolidate those measures into one, over the objections of some of their staunchest supporters.

“I don’t think I could vote for cloture without a vote on Glass-Steagall,” Sen. Maria Cantwell (D-WA) told reporters today. Cantwell is one of the lead authors of an amendment which would restore Great Depression-era regulations on banks that were repealed in 1999.

Republicans, meanwhile, failed today in an attempt to weaken a proposed new federal agency, which would protect consumers from predatory financial practices and products. Those efforts are set to continue in the days ahead, along with a separate GOP effort to limit federal financial involvement in government-sponsored enterprises Fannie Mae and Freddie Mac.

The long list of unresolved issues, combined with a degree of discord among members over how best to address all of them, led Senate Majority whip Dick Durbin to admit today that the Democrats might not be able to wrap up their work on the bill by early next week, as they’d hoped.

“[W]e’re making such slow progress,” Durbin said. “[Harry Reid is] worried about it and I am, too.”

*Late Update: Sanders amendment was expected to come to a vote Thursday evening, but last-minute maneuvering delayed the vote until probably next week, so that Sen. Bob Bennett (R-UT) can be present for the vote. Bennett is back home in Utah trying to hold off a challenge for his party’s nomination at the state GOP convention this weekend.