I used to drink the Kool-Aid. I was in the banking industry for the early
part of my career. I always thought that the restrictions that prevented
investment banks and commercial banks from operating under the same roof were
arcane and unnecessary. With the benefit
of hindsight, I can see that I was wrong about that.
The Glass-Steagall Act was passed during the Great
Depression (1933) with the intention of preventing government insured
depository institutions (banks!) from taking too much risk at taxpayers’
expense. The elimination of
Glass-Steagall approved by a Republican Congress with enough Democrats to
provide a veto proof majority and signed by President Clinton in 1999 was, in
the minds of many, on the critical path to the financial crisis in 2007.
The champion of re-implementing those safeguards was
Elizabeth Warren who, in 2010, was Sen. Harry Reid’s appointee to the
Congressional Oversight Panel on TARP.
But, she was not alone. Sen. John
McCain (R-AZ) co-sponsored legislation to restore those regulations as did the
bi-partisan duo of Sherrod Brown (D-OH) and David Vitter (R-LA) in the
House. In the end, we had to settle for
the Volcker Rule that bans banks from using depositors’ funds for proprietary
trading.
The Tea Party, a movement that has libertarianism roots,
nevertheless agrees the restoration of the Glass-Steagall prohibitions would be
productive. The Tea Party Tribune recently featured a banner headline on the subject that
reads “Bring Back Glass-Steagall” and mirrors Warren’s opposition to the Too
Big To Fail (TBTF) banks.
Now a US Senator from Massachusetts, Warren has attracted
attention from the liberal wing of the Democratic Party, those who think of President
Obama as a centrist.
How was a former professor and government bureaucrat able to
leverage her limited experience into a Senate seat on her first run at
political office?
She did so by tapping into the anger that Americans feel
across the political spectrum.
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| Sen. Elizabeth Warren (D-MA) |
There seems to be alignment between the origins of the
support for both Sen. Warren (and what is now being called the “Warren Wing” of
her party) and the Tea Party. They agree on who to be angry with – Wall St. and
other corporate interests that have their way with our political system; and, politicians
that seem to be in their thrall.
There’s even some alignment between the philosophical
underpinnings of their respective platforms.
Here’s a quiz for you. What is
the source of this philosophy?
“Government … has three basic functions:
1. Provide for the national defense.
2. Put rules in place… that are fair and
transparent.
3. Build the things together that none of us can
build alone – roads, schools, power grids….”
Sounds simply and basic.
Must be a libertarian, right?
I was trying to tantalize you with my headline and chose an
issue where the far left and far right are aligned to back it up. But, it’s fair to say that when it comes to
solutions, those two extremes are far apart.
Unlike the Tea Party, the Warren Wing of the Democratic
Party, as it is now called, as well as Democrats more generally believe in
government solutions.
I could go on about how and why I think their approach will
lead to failure. Perhaps, that would be
the subject of another post (or three).
However, that’s not my focus here.
The Tea Party wing of the Republican Party has become an
obstacle to progress. Lacking seniority
in the House and seeking more clout, they prefer to stand on principle rather
than seek compromise to find solutions to the major structural problems we now
face – tax reform, unsustainable entitlement programs, an undereducated
workforce and so on.
Will the Warren Wing act the same way? Will the rise of a hard left to
counterbalance the hard right be nothing more than political intransigence
positioned as unwillingness to compromise on values?
The common origins of our anger and frustration with
Washington represent an opportunity to find common ground – even as it requires
us to compromise some of our principles -- to address the big issues of the
day.
We were promised a “grand bargain”. I’m still waiting.
WHO WILL LEAD?
