Conservatives continue to insist that stepped-up financial regulation is actually a huge favor to Wall Street. Here's the normally-sensible Christopher Caldwell in the Weekly Standard:
[E]very time the president accuses Republicans of trying to “block progress” or of defying “common sense,” as he did that night, he is executing a dangerous tightrope walk. His party’s electoral fortunes depend on his making forceful calls for reform of our banking laws. His party’s fundraising fortunes depend on his ensuring that no serious reform—of the kind that endangers the big banks’ size and power—ever happens.
Inevitably the argument relies on the fact that members of the financial industry give large sums of political donations to Democrats. (The argument assumes they do so because of the Democrats tax and regulatory positions, when the more plausible explanation is that they do so despite them.)
Caldwell, to his credit, does cite the analysis of Simon Johnson, a left-wing critic who favors breaking up the financial industry altogether. Caldwell's article therefore takes the amusing form of a left-wing populist attack on the Democrats for failing to impose a total government takeover of the financial industry:
Democratic Senate Finance chairman Chris Dodd, in Johnson’s view, is not negotiating with Republicans in order to peel off one or two senators and get the toughest bill possible; he is aiming for the weakest possible bill that will be palatable to the public, and is negotiating in order to pin the blame for its weakness on Republicans.
A couple problems with this argument present themselves. First, it's simply at odds with observed reality. You can create a plausible intellectual model, as Johnson does, in which financial reform is being undertaken in collaboration with Wall Street. But anybody who's following this closely can see that this is not the case. The Washington Post has one such article today, headlined, "Lobbyists fret over legislation to reshape financial system":
[Lobbyists] were counting on Senate committee hearings and backroom negotiations among key lawmakers to remove or soften what the financial industry considers most objectionable in the bill. That hasn't happened. And now, as early as Tuesday, the Senate will begin to consider populist amendments that spell even more heartburn for the banks.
"You've got an environment, six months before an election, where politicians are acting like politicians," said Sam Geduldig, a financial lobbyist and former Republican staffer. "They are viewing any vote as a potential campaign ad. And that might not be good for any of us."...
"I think some of this stuff is going to get totally irrational," said one of many lobbyists who spoke on the condition of anonymity to discuss the situation more freely. "Every amendment you hear about is emotionally driven. . . . The Senate has turned from a deliberative body into an emotional reactor."...
Lawmakers from both parties have been eager to excoriate Wall Street. But industry lobbyists warn that populist proposals to shrink, break up or otherwise shackle some of the giants of the financial world could do more harm than good to the economy. These advocates say that stiff regulation could stifle the flow of credit, undermine American competitiveness in global markets and cost jobs.
Among the terms that lobbyists used to describe elements of the legislation: "Draconian." "Crazy." "Insanely unproductive."
This report is hardly an anomaly. Reporting in the financial press and the political press has consistently painted a picture in which financial lobbyists oppose regulatory legislation proposed by Democrats -- sometimes through outright opposition and cooperation with Republicans, and sometimes by taking a gentler "yes, but" stance to dilute opposition and sue for peace. These facts are so inconvenient for conservatives, who've grown intoxicated with their party's new self-image as populist outsiders, that they've simple refused to accept it.
Second, it's refreshing to see the Standard embrace some pretty stiff left-wing populist economics. But I do wonder. Suppose Obama had taken up this policy. And suppose he had somehow found 60 Senators willing to go along with it. Would Caldwell be praising this plan? I don't know -- he's an honest guy but that would be hard to imagine. Would the Standard be publishing a lengthy story lauding Obama's program? No. Unimaginable. It would be decrying the socialist takeover of 40% of the corporate profits in America, in tones so hysterical and over-the-top it would make its current Glenn Beck-like tone appear tame.