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.

Why is it that Senators, lobbyists, and the news media who cover Congress take as an article of faith that Democrats need 60 votes to pass their legislation in the Senate and the Republicans only need a simple majority?

The press has been reporting the need for 60-vote majorities as if it has always been a given – because 60 votes are needed to close down debate if the minority objecting decides to filibuster. Under Majority Leader Harry Reid, the idea of upsetting the Senate by daring the Republicans to actually carry through on their threats to filibuster is out of the question. When I asked a 30-year veteran Senate staff person this week how this phenomenon has come about, he said, “comity in the Senate is valued more than taking a stand for something.”

The Democratic leadership anticipates the Republicans will filibuster everything, so we read in the press that “under an agreement in the Senate, the bill needs 60 votes to pass.” But when the Republicans ran the Senate (many days it seems they still do), they passed something as important as Samuel Alito’s Supreme Court nomination with just 58 votes. No Democrat filibustered the nomination, and Alito took his long record of siding with large institutions against individual rights with him to the Supreme Court bench for the next 30 years.

Convinced by their pollsters and consultants that Americans do not want controversy, Democratic Senators cowered whenever then-Senate Majority leader Bill Frist called them obstructionists. This misreads the American people. We have found in our research that voters can discern between taking a stand on a controversial issue and bickering like school children.

For example, Americans view the filibuster as an appropriate tool for senators to use to make a point. In focus groups we conducted a few years ago we heard strong support for filibusters as a “check on the majority view,” part of our system of “checks and balances,” and a way to hear a diversity of views. If you lose public support after staging a filibuster, it be because voters disagree with you, not because you tied up the Senate business.

This Senate under the leadership of Harry Reid has seen no real filibusters, but has been limited by more 60-vote agreements than any in the history of the Senate. Some commentators have looked at this sorry situation and concluded the remedy is to eliminate the filibuster altogether, so there would be no need for cloture votes. I disagree. I think the voters in our focus groups had it right – the filibuster is a check on some extreme action that may be proposed by the majority party. It is not intended to be invoked on every vote – and if Reid challenged the Republicans to go ahead and filibuster, it would not be used that way.

The Democratic leadership in the Senate should force the Republicans to stand and defend their opposition to Democratic initiatives – dare the Republicans to filibuster. On issue after issue – on aid to cities and states, on taxes, on health care, on education and transportation funding – if the Republicans want to dramatically demonstrate their differences with Democrats by way of the filibuster, the Democrats should let them. This would require the Democrats having the ability to defend their own positions. Right now, neither side needs to engage too much – they simply “have an agreement that it will require 60 votes to stop debate and pass the legislation.”

Amplifying attention to issue differences between Democrats and Republicans would mean that the winners and losers would be more clearly defined. When Senator Strom Thurmond staged a filibuster to block civil rights legislation in the 1957 he heightened the attention of the nation on the issue of racial equality. Ultimately, his position failed.

As soon as the Democrats learn not to fear the filibuster, there will be fewer threats to the filibuster and the Senate will get back to majority rule.

Update: edited for clarity

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.