If taxing banks financial compensation packages will help reduce systemic financial risk, then a chunk of financial regulation might be immune to a filibuster.
The Shrill One has a typically good column today setting forth many of the crucial issues of the upcoming financial regulation struggle. As they say, read the whole thing.  Krugman says that the current regulatory structure allows egregious conflicts-of-interest, in which bankers get huge bonuses for taking unreasonable risks that threaten the financial system.
But the third-to-last paragraph may be the most important. Because of these bizarre conflicts-of-interest,
reform really should take on the financial industry’s compensation practices. If Congress can’t legislate away the financial rewards for excessive risk-taking, it can at least try to tax them.
If taxing certain kinds of compensation practices can reduce the risk, then that means that a new package of tax incentives and disincentives can plausibly be included in a budget reconciliation package. And that means that Joe Lieberman, Ben Nelson, Blanche Lincoln, Kent Conrad, and Mary Landrieu will not be able to hold the rest of the country hostage. (The question, as always, will be whether such provisions are only “incidentally related” to the budget, about which more later.).
Of course, it’s hardly optimal to use a tax strategy for financial regulation simply because this will prevent an assured Republican filibuster. But you regulate with the filibuster rules you have, not the filibuster rules you would like. At least until January 2011.
PS In any event, compensation reform should be part of a free-standing bill; I will be happy to see Richard Burr and David Vitter, while campaigning for re-election explain why they are joining a filibuster of it, as well as every GOP candidate explain why they would do the same thing.
Author: Jonathan Zasloff
Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees.
Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses.
Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.
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Johnathan, you, and presumably, Krugman assume the Democratic leadership actually want meaningful reform of the financial industry (as opposed to merely the appearance of meaningful reform). With this set of individuals that is not a safe assumption to make.
Look at the campaign finance numbers for campaign committees and Leadership PACS. In terms of the top five sources, by industry, to the most relevant members of Congress the Securities and Investment industry comes in at:
Harry Reid, second .
Max Baucus,first.
Nancy Pelosi, fifth.
Barney Frank, second.
And, of course, for Barack Obama, fifth.
Guess I had too many links in the previous post…none of them took. The figures can be found at http://www.opensecrets.org by looking at contributions by industry for each of the named individuals.
In a certain sense, this will be a profound test of the Democratic Party leadership, with serious consequences. Right now the economy is going to suck badly in Fall 2010, at best (i.e., no double-dip).
The state budgets will have run out long ago, leading to layoffs, benefit cuts, spending cuts and tax increases. The unemployment situation will be very bad. And this will be in it's third year. Meanwhile the GOP can happily blame it all on the Evul Librulz, who give your money to n*ggers, sp*cs and Wall St J*ws.
If the Democratic leadership isn't willing to play the populist card, then the GOP will own it, and play it for all that it's worth. Meanwhile, Wall St will still back the GOP, because a castrated Democratic Party will pose no risk of actual reform, and the GOP *always* gives a better deal.
Liberals will be demoralized. HCR was a mess - probably worth it, but still a mess. Obama and Reid spent the year telling liberals to STFU, there were Blue Dogs and L-Maggots who needed to be served. If there's no financial reform worthy of the name, then liberals will have spent 2 years being the Obama's whipped dogs, and will stay home.
My bet is that Obama doesn't go against Wall St, and the Democrats take a sound beating. This will really hurt him in the second half of his first term, since the GOP still has no incentive to cooperate. And, of course, Respectable People will blame liberals for not understanding that in an election, their job is to donate and work hard (in between elections, their job is still to STFU).
There is no MAJORITY in the Senate for finance reform. When it comes to money, we have a one-party system. The Democrats would rather lose power than cross organized wealth. It's like gazelles running from lions. They all know some survive.