In the almost two years since the height of the financial crisis, Washington has debated what measures should be taken to forestall future crises. After many twists and turns, the Dodd-Frank bill is about to be signed into law by President Obama. This bill represents a major legislative achievement for the president and his party in Congress. The complex piece of legislation is the first major overhaul of financial regulation in over seventy years and it touches all aspects of the industry, from banking and derivatives to credit ratings and consumer protection.
Of course, not everyone is happy. The financial services industry is certain to complain of new restrictions on banking activity, burdensome regulation, and heightened oversight of its dealings with consumers. Republicans and conservatives are sure to add that the bill goes too far in supplanting the wisdom of the market with government decree and does not eliminate the possibility of future bailouts of "too-big-to-fail" financial firms. Many liberals and progressives are no happier. The bill does little to reduce the size of financial firms, does not restore the Glass-Steagall firewall between commercial banks and other financial firms, and does not fundamentally challenge the compensation practices that they believe contributed to the crisis.
But one progressive, Wisconsin senator Russ Feingold, let principle get in the way of making the bill modestly more progressive. Ironically, by refusing to support a bill that he considered too modest, he ensured that the bill would be more conservative and favorable to banks.
To understand how Senator Feingold managed to pull this off calls for a primer on the arcana of Senate procedure. Debate cannot be terminated and measures voted on unless 60 senators vote for "cloture." Consequently, senators can block legislation by filibustering until a sufficient number of senators vote to end debate and proceed to a vote.
The senator who would provide the sixtieth vote has enormous bargaining leverage as she is in a position to extract changes to the underlying bill in exchange for her support. Generally, the best way to build a coalition for a liberal proposal is to secure the votes of the 60 most liberal senators. So in this scenario the pivotal senator is the 60th most liberal. With the death of senator Robert Byrd, this position is held by the ever so slightly more conservative of the two Maine senators, Susan Collins (Olympia Snowe is #59 most liberal; Feingold is #1).
This is where Senator Feingold's principles come into play. Because he refused to vote for cloture on the Dodd-Frank bill without major revisions, a coalition of 60 liberal votes became impossible. So Senator 61, Scott Brown, became the dealmaker.
Since winning Edward Kennedy's Senate seat in a special election, Brown has certainly proved to be no conservative firebrand. Yet he has clearly staked out a position to the right of Collins and Snowe, especially on economic matters. So his vote on financial reform was a much tougher "get" than either of the Maine senators.
As it turns out, there were real consequences of Feingold forcing Brown into the pivot position. One of the provisions to come out of the House-Senate conference was a levy on large financial firms to pay for the costs of financial regulation. This provision was quickly dubbed a "bank tax". As a result, Brown, who had supported the earlier Senate version, began to waver. The provision not only ran counter to his ideological opposition to anything resembling a tax increase, but would have been costly to large financial firms in Brown's home state.
In the aftermath of Byrd's death, a defection by Brown would necessitate picking up both Democrats who had opposed the original Senate bill, Feingold and Washington's Maria Cantwell. Cantwell came around, Feingold didn't, and the bank tax was gone. As a result, $19 billion in costs were shifted from the banks to the taxpayer. Feingold has performed the legislative equivalent of voting for Nader in Florida in the 2000 presidential election: standing on principle only to get an outcome he couldn't possibly have wanted.
In this era of polarized politics, the ideologically-driven behavior of our political leaders is often lamented. But in the end, both progressives and conservatives normally make short-term compromises with their principles in order to achieve some of their long-term goals. Senator Feingold's unwillingness to do the same has resulted in the equivalent of yet another bank bailout.
Nolan McCarty is the Susan Dod Brown Professor of Politics and Public Affairs at Princeton University. Keith T. Poole is the Philip H. Alston Jr. Distinguished Chair of Political Science at the University of Georgia. Thomas Romer is a Professor of Politics and Public Affairs at Princeton University. Howard Rosenthal is a Professor Politics at New York University.