Feingold's Folly

Senate Democrats may have a harder time than they expected passing a bill to reform the nation's financial system — and for that they might be able to thank their Democratic colleague from Wisconsin, Russ Feingold.

Feingold, who cherishes his independence, says he won't vote for a bill that would establish stronger consumer protection and rein in some of the worst excesses on Wall Street. Many Republicans oppose the bill, too, but for a very different reason: They fear any additional regulation.

Feingold, the only Democrat in the Senate likely to vote no, says the reforms are too weak. Doing nothing is better than passing this bill, he believes.

Feingold couldn't be more wrong. We won't pass judgment on his motivations, except to note that he may face a grueling campaign in the fall. Honing his reputation as an independent thinker while cracking down on the big banks may have political currency.

We concede that Feingold is not alone in his criticism. Paul Volcker, the former chairman of the Federal Reserve and adviser to President Barack Obama, complains that the bill has been watered down.

But while Feingold is putting the bill in some jeopardy, Volcker is holding his nose and urging senators to support it.

In the political context of the moment, with the big government boogeyman being trotted out by Republicans at every turn and after months of negotiations, this bill is the best that can be had.

Surely, Feingold knows this. Does he really believe that the status quo is better?

The bill would limit proprietary trading by banks, allowing them to invest only 3 percent of their capital in hedge funds or private equity funds and only then if those investments are "walled off" from the bank in a subsidiary. The bill establishes a new office of consumer protection under the Fed with an independent budget and presidentially appointed chief. The bill ensures more transparency in derivatives trading. It provides a way for the government to restrict troubled financial institutions and creates a process for orderly liquidation of those institutions if needed.

We would have liked an independent consumer protection agency. We would have liked proprietary trading banned entirely at banks. But politics is politics, as Feingold knows. The bill can be a starting point — unless Feingold's vote dooms it. He should reconsider his position.

REPRINTED FROM THE MILWAUKEE JOURNAL SENTINEL.

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