The approval of Senator Bernie Sanders’ amendment to audit the Fed is an important victory, and the 96-0 vote is something to celebrate and admire. The audit will show not only where the money flowed, but also potentially shed light on the conflicts of interest and incestuous relationships between Wall Street and the Fed that riddled those decisions.
But I’m inclined to agree with The Nation‘s William Greider who called the audit amendment a “free vote” since it was clearly going to pass—an easy way for conservative Senators to join authentic reform advocates like Sanders and portray themselves as “down with the people.”
Put it this way—who has constituents out there who are pro-bailout, pro-bank, and pro-Fed?
A far more difficult vote is expected any day now on an equally important amendment to the financial reform bill—one which will be much more revealing in terms of who is doing the people’s work and who is doing the banks’ bidding.
The Merkley-Levin amendment—introduced by Democratic Senators Jeff Merkley (OR) and Carl Levin (MI) and cosponsored by Sanders, among others—would rein in proprietary trading (i.e. subprime securities, derivatives) by “regular” banks; impose capital requirements on “systemically important” nonbanks (think Goldman, AIG, Morgan Stanley) so when their crappy bets don’t pan out we don’t have to pick up the tab; and prevent investment banks from betting against the very securities they peddle to their clients (call it “The Goldman Rule”).
Here is how the Senators’ press release describes key aspects of the legislation:
• Bars banks, bank holding companies, and their affiliates and subsidiaries from engaging in high-risk speculation involving any stock, bond, option, commodity, derivative, or other security or financial instrument. Also bars those entities from investing in or sponsoring a hedge fund or private equity fund.
• Requires massive, systemically-critical nonbank financial institutions (i.e., giant Wall Street investment houses whose failure will damage the banking system and access to credit) to set aside additional capital to decrease the risk posed by speculative trading.
• Prohibits conflicts of interest such as we saw when Goldman Sachs bet against the packages of securities they assembled and sold to their clients.
According to Senate staffers, the banks have mobilized against this amendment big time. A senior Dem aide told me “a movement is afoot to force us to meet a 60 vote-threshold” on the amendment. Of the previous 20 amendments, only one—Senator Durbin’s good provision on interchange fees—was forced to reach 60 votes rather than a simple majority.