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Obama’s Big Success—Sort Of

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Pablo Martinez Monsivais/AP Images
President Barack Obama with Senator Christopher Dodd and Representative Barney Frank after signing the Dodd-Frank Wall Street Reform and Consumer Protection Act, Washington, D.C., July 21, 2010

It seems a different era already, those days in 2009 and 2010 when Barack Obama and his large Democratic majorities in both houses of Congress were passing major pieces of legislation. And it was a different era—as we have seen since the Republicans took control of the House of Representatives after the 2010 elections. Since then, legislation of any significance has been nearly impossible to come by.

The official record shows the passage of 283 laws by the 112th Congress, which sat from January 2011 to January 2013. It sounds like an impressive number, but in fact most of these were technical or quite narrow in scope. At most there were fewer than ten truly important pieces of legislation, and arguably fewer than five. Virtually all had to do with the ongoing fiscal trench warfare, simultaneously grueling and tedious, that engulfed the capital during the 112th Congress and has continued into the current 113th. The bills were passed through clenched teeth on both sides.

Beltway insiders, the people from think tanks and nonprofit groups and such who have devoted their careers to seeking legislative outcomes, must persuade themselves that the legislative process can still work. Moments of vindication and triumph—a fiscal “grand bargain” between the two parties, bipartisan immigration reform, new gun control laws—must be within their grasp. Otherwise what are they doing with themselves all day, and why? The Beltway culture requires that these people make, at meetings and seminars, frequent professions of optimism as the audience members nod their heads hopefully, even as everyone knows these professions to be false.

The fact is that Capitol Hill barely functions. Its secondary purposes are still met with efficiency: staffers help constituents with their Medicaid questions; members secure funding for new senior centers; letters of congratulations are mailed out to centenarians; the artwork of promising high schoolers continues to be mounted in the long, curving subterranean hallway from the Longworth House Office Building to the Capitol. But there is hardly any legislation.

One is tempted (especially if one is a Democrat) to think back on 2009 and 2010 as a comparative golden era. And comparatively, it was. There was credit card reform, student loan reform, and equal pay for women, to start with the smaller but still quite meaningful items. Then, of course, there was health care, the new approach to the stimulus, the rescue of the auto companies, and financial reform. But the great value of Robert G. Kaiser’s Act of Congress, which chronicles the financial reform bill from inception to passage, is its refusal to accept the Washington cliché and argue that the Dodd-Frank legislation represents a moment when Congress worked the way it is supposed to.

To the contrary, the book paints a harrowing picture of dysfunction. It shows that Dodd-Frank became law only after an endless slog and several near-fatal scares. Thus a paradox makes Act of Congress particularly valuable and worth reading. It uses the passage of the most far-reaching piece of financial reform legislation since the New Deal to show not how Congress works, but how it doesn’t, even when a result is attained.

Think back to September 2008, when the country and world were on the verge of global economic meltdown. Kaiser, a longtime Washington Post veteran whose experience in covering the capital goes back to the 1970s, evokes the moment well, opening his book with a tense meeting in then Speaker Nancy Pelosi’s office arranged for September 18 of that year by George Bush’s Treasury Secretary Henry Paulson, a meeting that Paulson insisted to the Speaker “cannot wait until tomorrow morning.” Paulson and Fed Chairman Ben Bernanke told the assembled senators and House members from both parties that disaster such as they’d never seen loomed before them. Bernanke said that “if we don’t act in a very huge way, you can expect another Great Depression, and this is going to be worse.” Paulson said, “I’ve never seen anything like this.” Senator Chuck Schumer, who was present, later told Kaiser: “I could hear everyone gulp.” Congress acted quickly to bail out the banks.

But the next and more difficult challenge would be passing reform legislation designed to ensure that a crisis like that one—driven by large banks and other large-scale holders betting against their own loans—could not happen again.

I remember wondering, in the spring and into the summer of 2009, just what this reform legislation would contain and why it was taking so long. It wasn’t that the principals weren’t working on it. Barney Frank, who chaired the House Financial Services Committee and through whose eyes much of Kaiser’s story is told, had his first conversations with the new Obama administration about financial regulatory reform on February 2, 2009, not two weeks after Obama took office. Frank originally thought that he would be able to pass sweeping legislation in the House by April or May.

Chris Dodd, who chaired the counterpart Senate committee and who is Kaiser’s other principal source for Act of Congress, knew that the Senate would need more time, as the Senate inevitably does. But in that Beltway-culture way, hopes were high. Dodd hosted a dinner of the Democratic members of the Senate Banking Committee at a Capitol Hill steak house, informing them, in Kaiser’s words, that he was eager “to follow Banking Committee tradition and produce a bipartisan bill on regulatory modernization.” Frank, after an early White House meeting that included Richard Shelby, the top Republican on the Senate Banking Committee, said: “One of the hopeful things was Dick Shelby saying that he plans to be very supportive of this and he and Dodd appear to be ready to work together.”

Obama made it clear to Dodd and Frank that in contrast to the health care legislation, which was being written on the Hill, the president’s staff, not theirs, would take the first pass at drafting legislation. The two men accepted this, but they ended up waiting a long time—language wasn’t completed until June, and even then what was produced was not actual legislation but a white paper outlining general goals. Among them: (1) creating a new “systemic risk regulator” to crack down on risky behavior by large financial firms (of all kinds, not just banks, since a nominal insurance company, AIG, had done much to precipitate the crisis); (2) establishing a new “resolution regime” for failing banks, to close them down in an orderly way; (3) regulating the markets in derivatives; (4) requiring firms that gamble with mortgages to retain a financial interest in the mortgage-based bonds they created in order to give them an incentive to see that the underlying loans were solid.

Every so often, Kaiser flings open interesting little windows on the broader process, relaying the thoughts and actions of what are called in Washington the various “stakeholders.” Apparently some clients of the Wall Street law firm Davis, Polk, and Wardwell—Kaiser doesn’t say which clients—requested that the firm analyze this white paper for them, so the clients could plot a lobbying strategy. Davis, Polk returned the verdict that the outline was “far less revolutionary than some either feared or hoped for” and reflected “an ‘art of the possible’ approach to regulatory reform.” One might have thought, as the president surely did, that this was legislation that could have won some smattering of Republican support.

Many members of Congress are dull characters, but Kaiser is fortunate that his two principals bring considerable personality to his enterprise. Frank, who retired at the end of his last term, is well known for his acidic wit and his rumpled, beleaguered mien. “Irascible” is the euphemism usually employed by Washington journalists to describe him. The noneuphemistic way to describe him would be “unpleasant.” Indeed he’s so brusque, so uninterested in small talk to the point of appearing to be repulsed by the idea of it, that it’s hard to imagine how he became a politician, and harder still to see how he ever won elections. While he was always deeply interested in the substance of policy problems—he started his career as an aide to Boston Mayor Kevin White in the early 1970s—the electoral side of politics horrified him, and in his early races, Kaiser reports, aides worked to keep him away from voters lest he alienate them. A staff member from those days told the author: “You have to love Barney Frank to like him.”

Dodd is a less mythic figure in Washington, but nevertheless a man with an unusual history of his own. His father, Thomas Dodd, was a venerated Great Society–era Connecticut senator who ran into some ethics problems late in his career. He was censured and voted out after two terms. Chris, a bit of a bounder as a youth who rarely made dad proud, excitedly called home one day from law school at the University of Louisville to report that he’d made the law review; his father died of a heart attack that night. In the House and later in the Senate, Dodd was known as an unapologetic liberal by day—and by night, especially in the 1980s when both were divorced and single, as Ted Kennedy’s closest drinking buddy. He remarried later, and became a father for the first time at age fifty-seven in 2001.

Kaiser’s account makes it abundantly clear that this complex, extensive piece of legislation would probably never have been passed if not for these two men and their different but complementary sets of skills. Frank’s great asset was his critical intelligence, and throughout the process, he impressed everyone, ideological foes in particular, with his knowledge of the financial industry. Very few legislators truly understand high finance, and Frank was an exception (and could not be buffaloed by bankers or their lobbyists). In addition, Frank, though unconcerned with bonhomie, understood how to be a good and gracious committee chairman, making sure his unwieldy committee’s members (sixty of them in all) felt that they’d had a chance to speak their piece and have their amendments at least looked at.

Dodd’s asset was his cheerful relentlessness, which in turn was embedded in his increasingly anachronistic faith in the United States Senate and its ability to do great things. To announce the commencement of his committee’s work on the bill in November 2009, he had his staff reserve one of the Senate’s most historic rooms, the second-floor caucus room in the Russell Building, where both John and Bobby Kennedy had announced their presidential candidacies and where the hearings on Joe McCarthy and the US Army had been held. But it turned out not to be quite like the old days:

The room was flooded in electric light for television cameras, but the networks had not responded to Dodd’s attempt to create a historic occasion. Just C-SPAN sent cameras. The two long tables reserved for reporters had many empty seats, as did the public gallery. Only the seats for Senate staff were full, at least sixty men and women in rows behind the long table covered in wine-red felt where the senators sat.
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