Can Financial Reform Pass After Health Care?

Everyone seems to agree that in the wake of 2008's financial meltdown Washington must institute some regulatory reforms. But in the poisonous post-health-care-reform atmosphere, with even deeper-pocketed industry players, can a bipartisan deal be reached? Or is financial reform, like health care, the stimulus package, and the 1993 budget plan, going to be another unipartisan achievement?

As recently as last week, the conventional wisdom would have been no. After all, the dynamics were somewhat different from health care. Financial reform has already passed the House of Representatives. In the Senate Banking Committee, Sen. Chris Dodd, a lame duck who has been substantially weakened by connections to the mortgage industry, would seem like an unlikely person to muscle the bill through. Unlike with health care, where many members of the GOP really had no interest in expanding coverage to the uninsured, there was across-the-board agreement that fixes were needed. Rage at the Federal Reserve, the poor regulation, and, especially, the bailouts can be found left, right, and center. And Dodd's Republican counterpart on the Senate Banking Committee, Sen. Robert Corker of Tennessee, is more pragmatic than many of his colleagues. (Of course, he's joined with all the other members of the Republican minority in opposing pretty much every major piece of legislation proposed by the Obama administration and the Democratic majority.) Dodd and Democrats earnestly wanted to prove they could craft a bipartisan bill that would get widespread support.

And yet on Monday the Senate Banking Committee approved a bill on a party-line vote.

What happened? Senators may be dumb, but they're not stupid. As the health-care endgame approached, Dodd and his colleagues learned something they should have learned a year ago. There's no point in dragging out talks and negotiating so long as Republicans are sticking to their strategy of unified, massive resistance. In an interview with Politico, Corker said that he and Dodd and their colleagues were working toward a bipartisan deal. But when it became clear that few, if any, Republicans on the committee, or in the Senate at large, would commit to signing on to any compromise they reached, the talks broke down. Dodd & Co. had watched what happened last summer, when Sen. Max Baucus of Montana spent several weeks negotiating over health care with three Republican colleagues and making compromises aimed at getting them to support it—only to see each denounce it roundly.

There is, literally, one major difference between financial reform and health-care reform. Last year, when the Senate passed health-care reform, the Democrats commanded a 60-seat majority. Sen. Scott Brown of Massachusetts now provides the 41st Republican vote for a filibuster. So now a game of chicken will be fought on the Senate floor. Corker essentially laid out the choice. Republicans can attempt to amend and influence the contents of a set of reforms that are both necessary and likely to be popular. In so doing, they can claim to have influenced events but they'll hand Democrats and Obama another legislative achievement. Or they can stick together and try to prevent the Senate from voting on a law that is both necessary and likely to be popular—and hand the Democrats and Obama a campaign ad.