David Sirota

David Sirota
Denver, Colorado,
November 02
David Sirota is a political journalist, best-selling author and nationally syndicated newspaper columnist living in Denver, Colorado. He is a senior fellow at the Campaign for America's Future , the founder of the Progressive States Network and a Senior Editor at In These Times magazine, which in 2006 received the Utne Independent Press Award for political coverage. He also blogs for Credo Action. and the Denver Post's PoliticsWest website. His two books, Hostile Takeover (2006) and The Uprising (2008) were both New York Times bestsellers. In the years before becoming a full-time writer, Sirota worked as the press secretary for Vermont Independent Congressman Bernard Sanders, the chief spokesman for Democrats on the U.S. House Appropriations Committee, the Director of Strategic Communications for the Center for American Progress, a campaign consultant for Montana Gov. Brian Schweitzer and a media strategist for Connecticut Senate candidate Ned Lamont. He also previously contributed writing to the website of the California Democratic Party. For more on Sirota, see these profiles of him in Newsweek or the Rocky Mountain News. Feel free to email him at lists [at] davidsirota.com

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Editor’s Pick
OCTOBER 12, 2009 2:16PM

Floors Not Ceilings, Stupid

Rate: 15 Flag

"States rights" has been the divisive clarion call of the extreme right on social and civil rights issues for decades. But devolving power to the states doesn't have to be a bad thing. It can be what's known in policy circles as Progressive Federalism - an ideology whereby "governors and activist state attorneys general [are allowed to] lead the way on environmental initiatives, consumer protection and other issues," as the New York Times reported in a piece about the Obama administration's support for the idea.

But in order for Progressive Federalism to happen, the federal government has to be supportive of floors not ceilings - that is, oriented toward setting minimum progressive regulatory standards that states must at least comply with, not maximum regulatory ceilings that states are not allowed to go above and beyond. And the problem is that the Democratic Party is split on that idea - because Big Money hates it.

Case in point is the intensifying debate about Wall Street reform. During the era of deregulation, Washington policymakers passed statutes preempting (read: invalidating) many state laws that went further in regulating the banking industry than federal law. Now, a faction of Wall Street-funded "New Democrats" are trying to gut a White House proposal to change that paradigm and establish minimum floors of bank regulation that states can go beyond. According to the Wall Street Journal this Democratic congressional faction is trying to flip the proposal on its head by making the final product establish a federal ceiling whereby states cannot regulate banks any further:

Democrats are split over whether the proposal should allow states to trump federal regulations and enforce their own, often tougher consumer rules against national bank...This would permit states to bar certain fees and late charges otherwise allowed by federal regulators.

The White House proposal would create a new Consumer Financial Protection Agency with the power to write and enforce rules against a range of products. States would be allowed to write stricter rules than the CFPA, overturning existing policies under which national banks typically are immune from state regulation...

Rep. Melissa Bean (D., Ill.) is preparing an amendment that would prevent states from enforcing tougher standards against national banks than the federal entity's.

It's self-evident that what Bean and the Wall Street-funded Democrats are trying to do has nothing to do with the "public good" and everything to do with political harlotry - The New Democrats are, after all, have proven to be the Best Little Whorehouse in Washington and this just proves that truth.

Indeed, the meltdown did not happen because there were too many regulators - it happened because there weren't enough. So obviously, any "reform" bill that effectively takes more state cops off the beat isn't going to be real reform. Likewise, the Wall Street meltdown did not happen because regulatory agencies were going to far in policing the market - it happened because those agencies weren't going far enough.

Thus, it's obvious why real "reform" should set minimum standards of progressive regulation not maximum limits of such regulation, and even more obvious why that same reform should encourage (or at least permit) state regulatory institutions to go further than federal standards if their constituents (via their legislatures, etc.) want. But it is also obvious why Wall Street lobbyists and the lawmakers they have bought and paid for want to do the opposite: The more real reform becomes, the less speculative profiteering that will be allowed and hence the less six- and seven-figure lobbying contracts, and the less campaign contributions.

The good news is that, according to the Huffington Post, President Obama is sticking to his guns on this one:

President Barack Obama reaffirmed his commitment Friday to allowing states to adopt stronger consumer protection measures than the federal government when it comes to financial products like credit cards and mortgages.

In a meeting at the White House, Obama told a group of state attorneys general and consumers that he was still committed to the idea. He didn't mention it, though, during his public remarks.

Over the last several years many states have adopted tough pro-consumer laws governing predatory lending, bank fees, interest rates and late charges, only to be told by federal regulators that their laws can't be applied to national banks such as Bank of America, Citibank, J.P. Morgan Chase and Wells Fargo.

If anyone understands the value of Progressive Federalism, it should be President Obama considering most of his political experience comes from the Illinois state legislature. So this stand is definitely grounded in his own history.

Certainly, I hope he goes public with his stance - and based on the White House's willingness to issue its first veto threat over the reform package, I'm optimistic that he will if the Wall Street Democrats are successful in trying to destroy reform (the vote on Bean's amendment is probably going to happen in the House Financial Services Committee this week). This is a fundamental, baseline issue rooted in common sense: "If a state wants to provide for its citizens' stronger consumer protections, it ought to be able to do so," as Obama's Deputy Treasury Secretary Neal Wolin told reporters.

Make no mistake about it: This fight over state and federal policy isn't limited to Wall Street. States, as the old cliche goes, are the laboratories of democracy. You can see that truth in financial reform and even in in the debate over health care: The Progressive States Network has organized a letter to Congress signed by more than 1,000 state legislators demanding real reform, and a leading proposal before Congress would allow states to administer their own public plan options.

The point here is not to inherently value state regulation over federal regulation or vice versa, but to make sure the two reinforce each other. To get that kind of Progressive Federalism on every issue will, again, require floors not ceilings.

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Nothing like the hogs feeding at the trough.
it's nice to see obama making himself useful, now and again. this is an important measure, and the united states would be a lot better off if it were less united.

decentralized power is usually a good thing. just as california has led the way in pollution and green energy, the states could offer competing standards in regulation.

the banks are aware that they would end up at the upper end of that regulation, through interstate competition, and might find it more difficult to buy a lot of state legislatures than one federal one.
Well, you're right Al Loomis. But this measure is eyewash compared to what is needed beyond banking regulations. I'm referring to a whole new set of regulations that will rein in Wall Street. Obama is silent on that one. But, of course, his economic brain trust is a gang of Wall Street insiders. Don't look for any new regulations being proposed by that bunch.
I truly want to see the whole system torn down, Banking, Reserve, Trading, Insurance, and all the Regulatory nonsense, history ! Capitalist run system is destined for failure, they write and regulate the laws, themselves... What chance do tough state, or federal policies have anymore? The "Talking Heads" have neither brain nor conscience it seems... Good Post David
States rights mean the Fed should not be using black helicopters to arrest grandmothers smoking gluacoma medicine. Or passing some amdendment telling states who can marry or not. It is not a conservative issue. It is a constitutional issue, and one of which Thomas Jefferson was it's biggest proponent. Government should be grass roots. Power should come from the bottom not the top. Not the bank funded politicians and organizations telling everyone else how to live. Obamas biggest contributers were the banks he let Geithner and Bernanke shoveled trillions to with no oversight or auditing. Both parties are so in hock to Wall Street this isn't even a democracy anymore. And you can thank Woodrow Wilson for that.
I dont even know why they have a Nobel prize for economy. What do they teach in these courses and does anyone learn anything? If that is so (as I know everyone will insist) then why is that no one knows anything?
Second what PD said.
Rtd (with a heavy heart ....)
This is who is getting the 9.7 trillion in bailouts and guarantees from the past and present administration:


National and foreign bankers. We borrow money from them to loan and give them money.
Excellent article. I'm dashing a note off to Ms. Bean.
Giving the business of regulating financial institutions to states is a great idea -- but only with a floor! Of course, Wall Street doesn't want this; you think they are spending a lot money on congress now. Wait until they have to pursue a fifty state strategy to lobby lawmakers in states where the legislators have to actually live with their constituents! They would be toast!!
Excellent as usual. (Rated)
The root of the fear over excessive government interference is public not elite. For the elite it is only an abstract debate--which institution will be employed to control. For the public it is a fear over excessive government control. Thus the two sides are never in alignment. Democracy, when it is real, is a war between the people and government. What we have now is a nice co-dependency based on corporatism and consumerist desire. It will never be undone--it will have to implode all on its own. BOKO
"nothing to do with the "public good" and everything to do with political harlotry"
My new favorite saying. I plan on using it copiously.
One of the reasons the state-chartered banks have come through the last few years in fairly good shape is that their state regulators were paying attention to them, instead of spreading themselves too thin. Since those local institutions make most of the small business and mortgage loans, you need them to carry local economies through periods when bigger federally-chartered banks suffer losses, eat into capital and can't lend. Double-teaming federal institutions will just distract state regulators from what they're supposed to be doing--enforcing state laws. As for giving them power to enforce federal laws--uh, there's this thing called the Constitution.