Harold Meyerson has another great column today, the upshot of which is this:
The problem is that the drift of much of Wall Street toward the Democrats on noneconomic issues coincides with Wall Street's creation of inscrutable and unregulated investment devices that imperil the entire economy, as the current mortgage crisis makes painfully clear. On gay rights, say, the nouveau financiers are 21st-century progressives; on economic oversight, they are 1920s speculators, determined to keep their machinations free from public oversight. The decision the Senate Democrats make on their SEC appointees will be a good index of the relative strengths of the economically opposed forces within the party and may even foretell the balance of forces within a Hillary Clinton or Obama administration. If the financial industry prevails, it will also leave the Democrats having to answer an awkward question going into the 2008 elections: Why does America need two parties that represent Wall Street?
It's an issue I'll be getting into a bit more as the campaign goes on. For the moment, I'd just add that, with the decline of labor and of the Democratic Party as an institution oriented around the interests of the working class (which to some extent made it reflexively skeptical of business and finance), it's not at all clear to me where the constituency for regulating financial markets will come from. In principle, all non-rich people should have an interest in this kind of thing. And the Democratic Party still represents lots of non-rich people. But because these non-rich people aren't organized in a way that focuses their attention on this stuff, you get that classic political science problem of widespread costs and concentrated benefits, with the people reaping the benefits of loose regulation (i.e., Wall Street) ensuring that it never tightens up.
Put differently: Having a lot of Wall Street money men in the party would be one thing if there were some sort of counterveiling force to check them. But I don't see any evidence of such a force, at least not one that's institutionalized. It makes you realize that, for all his flaws, Eliot Spitzer is/was a pretty important figure.
Of the three major Democratic candidates, I think John Edwards probably represents our best hope on this front. But, given all the hedge-fund money even he raises, I'm not completely sold on his ability to rein in Wall Street either.