Think it Through

With Arlen Specter a Democrat again (he started out as one in the ’60s) and Al Franken on the verge of breaking former Senator Coleman’s four corner stall in Minnesota, the Washington conventional wisdom says the Democrats will finally have the filibuster-proof majority of 60 votes that they have been missing.  Right? Not so fast.

There is no reason to believe the addition of the comedian and the chameleon to the Democratic caucus meetings will give the Senate Democrats a filibuster-proof voting block. All it does is move the swing votes in the Senate from Susan Collins and Olympia Snowe to the likes of Ben Nelson, Evan Bayh, Mary Landrieu, and Tom Carper.

It further marginalizes the Republicans – no more need to hang on every word and nuanced sentence of Collins and Snowe – but it does not assure the President a cooperative Senate. Without Specter or Franken the Democrats already had 58 members in the Senate. The lack of a working majority is not about numbers but leadership.  One orthopedic surgeon would do more than two new Democrats. The leadership needs a stronger backbone. Democrats have been unwilling to let the Republicans filibuster, and have two parties debate whether the American people want to follow the new set of policies presented by the Obama Administration or not.

Just last week we had an example that gave credence to my belief that two more Democrats will not be much help to the President. The Senate voted on April 29th to kill the president’s bankruptcy reform measure, which would have given bankruptcy judges in mortgage foreclosure cases to authority to weigh the facts and allow people to stay in their homes if the circumstances warranted. It was a simple case of consumers (and the White House ) versus the banks, which wanted no flexibility in foreclosures. Twelve  Democrats, including Senators Max Baucus of Montana, Mary Landrieu of Louisiana, Blanche Lincoln and Mark Pryor of Arkansas, Ben Nelson of Nebraska, Tom Carper of Delaware, and newly Democratic Arlen Specter went along with all the Republicans to vote with the banks to kill the bill.

Some people are screaming about the possibility of the federal government owning the banks, while they should be concerned that the banks own the United States Senate.

If we cannot rely on two more Democrats in the Senate to make real change happen, we go back to leadership, which raises some questions:

• First, will Majority Leader Harry Reid do what Tom Daschle should have done – that is step down from his leadership position to return to Nevada to campaign more often to protect his Senate seat that is up in 2010?

• Second, if Reid does step down , will his lieutenant Dick Durbin of Illinois break free from his role of the last six years – that of the loyal deputy who traced the missteps of his leader, such as watching helplessly as Senate Democrats enabled President Bush to break the Constitution by legalizing warrantless wiretapping, passing the Military Commissions Act,and enacting the Patriot Act, as well as making a mess of the Roland Burris appointment ?

• Finally, could Senator Durbin as a majority leader revert back to being the intelligent fighter for progressive causes that he was before he became a member of the Reid leadership team whose game plan has been to avoid controversy at all cost?

The answers to these questions are worth more than two more Democrats in the Senate.

This week Senator Evan Bayh of Indiana announced he had organized 15 Democratic senators to form the “Practical Coalition” to work for more “moderate” policies.

My question is: Why?

• Have we seen the Senate pass wildly liberal legislation lately?

• Are the Democrats fighting to redefine themselves, at a time when the public has embraced the new Democratic President and the party controls both houses of Congress?

• Is it a political message training camp for centrists like Bayh and Mark Warner of Virginia to learn how to run for President while keeping their audiences awake?

• Is this just a tool for Bayh to run for majority leader after 2010?

• Does Bayh think he needs to do this to win reelection in Indiana?

What is it?

When Bayh says we need more practical policies it can only mean he wants more conservative, anti-government, and pro-business policies. This prompts the question: has Bayh been in Tahiti for the last five months?

We have a Democratic president and strongly positioned Democratic House and Senate because Americans want honest and responsible government that will take action for them against forces that are too large for individuals to tackle on their own. This means protect them from the abuses of big business, and provide programs that work. They are fed up with bail outs and bonuses. They are not against the government spending money on our schools and energy resources and transportation that will create jobs.

President Obama’s victory created a new constituency consisting of the traditional Democratic liberal base, as well as a majority of moderates, suburbanites, and people earning over $200,000 a year. This new coalition was not drawn to Obama because he promised to be more pro-business, or more moderate in tackling the big problems that confront our country, but rather because he offered the promise to hold government and business accountable and to enact big changes like health care reform.

The Practical Coalition reminds me of the Democratic Leadership Council, a tool of Democratic governors and members of Congress who were searching for a new profile for the Democratic party in the 1980’s when Ronald Reagan was president. Democrats like Bill Clinton, Bruce Babbitt, Al Gore, and Dick Gephart started the DLC because they felt the party needed to redefine itself away from what they perceived was its liberal cast. Reagan had won over working class Democrats who were fed up with Jimmy Carter’s double digit inflation and unemployment. Anyone who disagreed with Reagan was dubbed a tax-and-spend Democrat. So the DLC set out to define the party as one that would not tax as much and not spend as much.

The DLC adopted much of Reagan’s rhetoric about responsibility and smaller government, and started a think tank that cranked out half-baked ideas echoing the party they were supposed to oppose. The ideas were usually conservative and nearly always pro-business. I remember reading one DLC treatise on why Democrats should oppose raising the minimum wage because it would hurt the economy. A more famous DLC initiative was welfare reform, the idea of taking away health, nutrition, and child care benefits from mothers with dependent children who were trying to work. When it passed in Congress, President Clinton predicted it would decrease the welfare rolls. He was right, it did knock many single moms off public assistance. It also helped to increase the poverty rolls for families and single moms with kids. (for families, poverty rates rose from 9.3% of families in 1999 to 9.8% in 2007, and for single mom families, it rose from 27.8% to 28.3%).

It remains to be seen what bright ideas the Practical Coalition will put forth. Is their reason for being to reduce federal help to state governments during the recession? Is it to go slow on health care reform so we don’t upset the insurance companies?

These are not the priorities of the broad coalition of voters that that elected Obama President to solve our nation’s problems and bring about big change.

Message to Bayh and company – the DLC is history. If you truly want to be practical and move the country forward, disband and support the president.

President Obama’s pledge to bring back some meaningful regulation of the financial markets may be more difficult than he imagines. The reason: Senate Democratic leaders not only enabled the deregulation, they were cheerleaders.

In America, unlike other nations, the structure of investor protections against securities fraud stands on two separate legs: Government regulators and private lawsuits. Senator Chris Dodd, Chairman of the Senate Banking Committee, and other Democrats, worked diligently to saw off both legs.

Here is how the people’s representatives took the side of fraud defendants over the fraud victims.

STEP ONE: CURTAIL PRIVATE INVESTOR LAWSUITS

When in the mid 1990’s Dodd and fellow Democrats Charles Schumer, Patty Murray, and Harry Reid worked to curtail private lawsuits by investors who were victims of securities fraud, they weakened what has traditionally been the most effective deterrent to securities fraud.

Their actions represent the result of a determined effort by giant corporations seeking to do away with accountability in the financial markets because they felt it got in the way of their profits. In 1992 these companies spent millions of dollars on lobbying to get Congress to enact a law to shield them from private lawsuits. (Siconolfi, Michael, and Anita Raghavan. “Securities Firms Make Large Gifts to Congressmen.” Wall Street Journal 22 Aug. 1995: C1+.)

The Coalition to End Abusive Securities Suits, or CEASS as it was known, included some large accounting firms caught in fraud scandals of the 1980’s and 90’s, such as Arthur Anderson, Coopers and Lybrand, Ernst and Young, Deloitte Touché. Other CEASS members included securities firms and insurance companies, such as Prudential Securities, Chubb insurance, Morgan Stanley, and Amdahl corp. It was the beginning of a massive, costly, and successful lobbying effort.

The CEASS lobby in the early 1990’s pushed hard for Congress to approve a new law that would make it more difficult for people to bring class action lawsuits in federal courts against companies allegedly involved in securities fraud. The legislation was called the Private Securities Litigation Reform Act of 1995 (PSLRA), and it changed the rules to require that investors prove intentional lying by company executives in order to get into court. This standard is so high that investors now practically need to have an executive make a videotape and say he lied before investors can challenge suspicious behavior.

Making these lawsuits harder to bring to court diminishes the main deterrent to securities fraud in the U.S., since federal and state government regulators are notoriously understaffed. Most of the big cases, such as the billion dollar scandal of Charles Keating’s Lincoln Savings and Loan selling worthless bonds to elderly retirees in the late 1980’s, were uncovered by private lawsuits which then led to SEC investigations. Under the new standards in the PSLRA of 1995, the Keating fraud and others like it would not have been uncovered. We now know the sleepy state of federal watchdogs is one reason why Bernie Madoff was able to operate for decades without getting caught.

Two members of Congress championed the Private Securities Litigation Reform Act of 1995, and took credit for its enactment over President Clinton’s veto:

Republican Christopher Cox, then a Congressman from Orange County, California. Cox collected campaign contributions from high tech executives who also happened to be fraud defendants.

Democratic Senator Chris Dodd, Chairman of the Senate Banking Committee, who became very popular among banks and securities companies who were fraud defendants and among insurance companies who pay the investor settlements in financial fraud cases.

Dodd enjoyed the eager support of many top Democrats in favor of restricting investors’ access to the courts.

Not everyone thought this was a keen idea, however. Consumer groups, states attorneys general who enforce the securities laws, the AARP, and the securities regulators in all 50 states sent messages to Cox and Dodd that the bill was a bad idea that would weaken safeguards against fraud. (”Less protection for investors.” Consumer Reports Sept. 1995.)

Rick Roberts, a former Securities and Exchange Commissioner under the first President Bush, warned in September 1995, “if you look at the whole picture, congress is taking away the right to bring an action if there is a fraud; it’s cutting the level of information investors receive; and third it will try to slash the SEC budget so there are no public remedies. If I was an investor, I would be getting very queasy about plugging my money into the securities market.”

STEP TWO: LETTING THE FOX GUARD THE HENHOUSE AT SEC

In 2004, President Bush appointed Chris Cox to be Chairman of the SEC and the Senate, with the approval of Dodd and the other Democrats, voted unanimously to confirm Cox. In so doing, Dodd and the Democrats agreed to place the protection of investors in the hands of a man who had already made it his cause to shred the most potent deterrent to securities fraud.

As chairman, Cox allowed securities firms to avoid legal requirements to be audited by accounting firms that were registered with the government. The result was that firms like Bernie Madoff’s used their own accountants to do friendly audits and fraud can remain undetected for years. Also, under Cox, the SEC’s budget declined in 2006, and 07.

Why bring up all of this recent history? Because when Sens. Dodd and Schumer cried out this week about how the SEC “missed Madoff,” it is hard to remain silent.

President Obama and Treasury Secretary Geithner should know the sorry record of the Congressional team it has inherited, before they suit up to pitch for stronger protections for investors. And voters should know when their Senators talk like Teddy Roosevelt and act like Jay Gould.

If we ever had any doubts that the United States Senate was truly the nation’s most exclusive — and perhaps isolated and calcified — club, this week’s behavior by majority leader Harry Reid wiped away those doubts.

The Senate Democratic leadership for the past four years has refused to rally Democratic Senators to stand up and face down the Republicans on issue after issue. When Democrats were in the minority, Reid did not think it was worth a Democratic filibuster over two right wing appointments to the Supreme Court – Samuel Alito and John Roberts.  Roberts even refused to hand over the legal advisories he wrote as a Justice Department official in the Reagan administration, which would have given the nation a better idea of where he stood on Constitutional issues. Roberts said no, and the Democrats, being consistent, said well, ok, never mind that we asked for them — go ahead and take a job (Chief Justice) that you will have for the rest of your life, from which you cannot be fired, and which will allow you to set policies that will affect all Americans for decades to come.

Similarly, Reid did not rally his party to stop the Military Commissions Act of 2006 which gave President Bush the authority to imprison people indefinitely and torture them based only on his suspicions rather than on evidence.

When the Democrats became the majority party in the Senate, Reid did not rally his party to call the Republicans’ bluff that they would filibuster bills to expand health care for low income children, restore habeas corpus rights taken away in the Military Commissions Act, and give longer home leave time for U.S. service personnel in Iraq. A majority of Senators supported each of these proposals but when the Republican leadership threatened a filibuster, maintaining order in the club was more important than taking a stand.

This past Sunday on Meet the Press, Reid finally seemed to stiffen his spine and prepare to fight – over whether or not to seat Roland Burris, the Illinois politicians chosen by Governor Blagojevich to fill Barack Obama’s vacant Senate seat.  Today, he refused to allow Burris to be sworn in.

John Roberts is not worth a fight – and Roland Burris is? Think it through, Democrats. Maybe it’s time for a change.