GOP Searches for Strategy on Financial Reform

Stuck between Democrats and Wall Street

As Democrats roll financial regulatory reform through Congress and Wall Street banks continue to draw populist outrage, Republicans face some tough choices. GOP leaders must decide whether to maintain their firm opposition to all things Democratic, which would risk allying them with ever-unpopular Wall Street, or to join the Democratic reform campaign, which would risk handing Democrats a major victory on the eve of national elections. If GOP obstructionism on health care worked politically, it was largely due to the reform plan's middling popularity. But voters are much more bullish on financial reform. What's a minority party to do?

• GOP May Be Coming Around  The Washington Post's Brady Dennis and Shailagh Murray report, "Key Senate Republicans on Tuesday began to back away from their sharp criticism of proposed new financial regulations and expressed optimism that a bipartisan deal on a bill that would drastically change the way Wall Street operates could emerge in the coming days." Why? "The change in tone came as the Security and Exchange Commission's lawsuit against Goldman Sachs for allegedly defrauding investors continued to dominate headlines, underscoring public anger at Wall Street and reminding lawmakers of the potential consequences of inaction."

• Dems Losing Messaging War  The New York Times' Paul Krugman looks at the PR battle, which he says Republicans may well win. "My understanding is that Obama officials have looked at the polls, which show that the public overwhelmingly favors cracking down on Wall Street; so they assumed that the GOP wouldn’t dare stand in the way. But they seem not to have learned, even now, that the right has an awesome ability to create its own reality: that Mitch McConnell et al would stand in the way of reform while claiming to be taking a stand against Wall Street."

• New Republican Tactic: Be Vague  The Washington Post's Ezra Klein muses, "The only specific policy they've mentioned has been the $50 billion liquidation fund. And though I think the fund good policy, you could remove or restructure it without doing much harm to the rest of the bill. So as with a lot of these legislative battles, we're not really having a policy argument here. Republican policy objections are vague enough that it'd be easy for them to change the bill slightly and declare victory. Simultaneously, their objections are vague enough that it'd be way for them to continue opposing the bill because it's a permanent bailout for reasons they never really explain."

• How They Won The Battle Over Resolution Fund  EconoBlogger Economic of Contempt uses Democrats' proposed $50 billion resolution fund as a case study. Democrats supported it, Wall Street opposed it, and it once looked certain to become law. "Enter Mitch McConnell. As soon as McConnell started loudly calling the $50bn pre-funded resolution fund a 'bailout fund,' and made opposition to it a Republican litmus test, everyone started distancing themselves from the idea. And now a pre-funded resolution fund is all but dead. Amazing."

• GOP Already Softening Regulation  Liberal blogger Matthew Yglesias laments "recalcitrant Republicans are keeping us from getting tough. Recalcitrant Republicans are the means through which it becomes the case that the government doesn’t get tough." He notes as an example that, with a recent House regulatory bill, "a minority faction of Democrats was able to weaken the bill" because of the GOP's unified opposition.