The Times of London is not known for its journalistic acumen. Therefore, its report that Goldman Sachs CEO Lloyd Blankfein expects a $100 million dollar bonus this year, based mostly on hearsay from other bankers at the World Economic Forum in Davos, strains credulity. Felix Salmon’s take is much more in line with reality.
Nevertheless, Blankfein’s bonus will unquestionably reach eight figures in 2009, if not nine figures. And these numbers, eye-popping as they are, must be put to use if we’re going to get meaningful financial reform this year. While the White House lists it at the top of their agenda, they have not done enough of the spade work to ensure that they aren’t sunk by yet another Frank Luntz memo.
In a 17-page memo titled, “The Language of Financial Reform,” Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.
“If there is one thing we can all agree on, it’s that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated,” Luntz wrote. “This is your critical advantage. Washington’s incompetence is the common ground on which you can build support.”
Luntz continued: “Ordinarily, calling for a new government program ‘to protect consumers’ would be extraordinary popular. But these are not ordinary times. The American people are not just saying ‘no.’ They are saying ‘hell no’ to more government agencies, more bureaucrats, and more legislation crafted by special interests.”
This notion of financial reform as a “government takeover” is basically the framework of the Luntz memo around health care, one which was also leaked early, one which Republicans mimicked to the point of parody, and one which was nevertheless very successful.
Luntz in particular takes aim at the Consumer Financial Protection Agency, which the White House has made the centerpiece of financial reform, arguing that GOP lawmakers say it will create additional bureaucracy and “choke off credit options to small business owners.” And that is already working on Capitol Hill. The CFPA is showing some shakiness in the Senate; Chris Dodd’s instinct was to throw it overboard to bring some Republicans on the bill. The President’s State of the Union veto threat on financial reform if it wasn’t “tough enough” may have been aimed squarely at this capitulation, but Obama could make that explicit if he wants to save the policy.
No amount of op-eds from Paul Volcker or Paul Krugman, wrapped up in economist language, will be able to counteract this. The policy structure, with a focus on leverage or resolution authority or consumer protection or systemic risk, is an important piece of the debate. But it’s not the only piece. On messaging, advocates for reform need to use a bludgeon. And that is best expressed with statements about Lloyd Blankfein’s bonus. There’s a simple path to squeezing conservatives and servants of the banks on all of this – put them one the side of the firms who wrecked the economy, and put yourself opposite them. Republicans are already on the record against things like the bank tax to recoup TARP losses, and there are half a dozen other policies in the reform packages that would have a similar dynamic. This can be leveraged into a fairly stark choice between competing alternatives.
When you see the crowd at Davos support a fee on banks to use toward future bailouts, you know that a strategy of making the companies responsible for the crisis pay for its resolution is popular and sensible. The best way to counteract Luntz is by showing the huge sums being consumed by the banks. You have to provide the narrative of villiany.
UPDATE: Obviously, Senate Democrats hosting a bunch of lobbyists at the Ritz-Carlton in Miami tends to undercut this message. FAIL.