This week, the debate over health-care reform conflated end-of-life counseling with killing off Grandma.  As it did, town-hall meetings around the country greeted Congress with slogans, shouts and suggestions that anyone who disagreed with something was stupid or still worse.  With this in mind, whither financial-reform legislation?

So far, we would guess that the fracas over health care won’t spread to financial services.  In fact – weirdly, we admit – it could boost the chances for comprehensive legislation this year.  Financial-regulatory reform is a rare issue on which the left and right agree a lot of the time.  For the industry and its friends in the Administration, this should be very, very scary.

Why would the health-care slugfest clear the way for financial legislation?  First, there’s the politics of it all.  If Congress – not exactly beloved of the populace at present – degenerates into non-stop disputes on the health-care bill, its leadership will look for something else to do before the session adjourns.  On the big-ticket agenda, there are only two items:  climate change and financial reform.  If only because the latter isn’t as advanced as the former, and positions aren’t as dug in, it may stand a better chance.

But, we think the financial package also stands a better chance than the climate bill for another reason:  people are still a whole lot madder about banks than they are about global warming.  Simply put, an unemployed person or foreclosure next door beats a drowning polar bear every time in terms of political mobilization.  Here, the strange-bedfellow alliance we noted above is particularly important.  While the left and the right dispute why the banking industry warrants change and how to do it, they agree wholeheartedly that something must be done.  That’s entirely different than global warming, where the two sides of the dispute disagree on even the fundamental need for legislation. 

An example of how the left and right agree despite their mutual loathing is the Ron Paul bill to reform the Fed.  It’s got more than a majority of sponsors in the House from both sides of the aisle who normally won’t do more than sit and spit at each other.  Why?  Liberals and conservatives have a common distrust of big financial institutions, with the Fed at the top of the list.  Treasury might come next, but big banks aren’t far behind.  In fact, the more Goldman Sachs becomes the poster child of the recovering financial-services industry, the more the left and right will put aside their antipathy and get down to drafting legislation that will put the President into a most uncomfortable, take-it-or-leave it spot.  Our guess then is that he’ll have to take it, if only because the amount of political capital needed to defend the financial industry would drain an increasingly hard-pressed Administration far too dry right before the mid-term elections begin in earnest.

 

.