Beating A Dead Horse

The notion that we ought to take our time to study and understand a problem before reacting to it, especially when it comes to something as complicated as legislating, is one I've discussed several times, most recently with regard to financial services reform.  Still, Congress is on the precipice of enacting a massive financial services reform law despite the fact that the Commission that Congress itself created to better understand the causes and nuances of the crisis has not yet completed its work.

Why?

One proponent of reform, federal judge and author of A Failure of Capitalism on the financial crisis, Richard Posner, explains this phenomenon:

But just as politics requires that President Obama be seen to be doing something about the oil leak in the Gulf of Mexico, though there is nothing he can do, so politics requires that Congress be seen to be doing something to prevent another economic disaster, though there is nothing it needs to do.

Posner doesn't say that the government doesn't need to change its policies, but that the changes necessary aren't changes in the law.  In short, they can be made largely without Congressional action.  Now, that's a problem, because if Congress doesn't solve the problem by passing a bill (the only thing Congress does is change the law by enacting bills) then Members won't be able to claim credit by the November election.

And THAT's why its rushing to pass legislation despite the ongoing work of the Financial Crisis Inquiry Commission - a government body created BY CONGRESS to report on the crisis's cause.  The Commission's work is ongoing (today, in fact, it is holding a hearing on the part played by derivatives, the regulation of which was one of the most contentious issues that delayed the financial services bill) yet their work will not be factored into the legal reform.

Better Bills

Yesterday, we asked why might Congressional bills be so long?


Despite the massive size of the financial reform bill, it may be the content, not the length, that is problematic.  From Monday's New York Times:

As Democrats close in on their goal of overhauling the nation’s financial regulations, several prominent experts say that the legislation does not even address the right problems, leaving the financial system vulnerable to another major crisis.

Some point to specific issues left largely untouched, like the instability of capital markets that provide money for lenders, or the government’s role in the housing market, including the future of the housing finance companies Fannie Mae and Freddie Mac.

Others simply argue that it is premature to pass sweeping legislation while so much about the crisis remains unclear and so many inquiries are in progress.

 Specifically, there IS a federal Financial Crisis Inquiry Commission that is supposed to be reporting on the causes of the crisis.  Congress created it and asked it to report in December of 2010.  Without a sound understanding of such causes, it would seem that a solution would be premature, no?  So why the rush to legislate before the report you asked for is due?


One reason, unfortunately, might be found in Congressional Quarterly's (subscription required) current cover story about how Democrats are looking to re-brand their populist image and tap into the public's general anger in time to avoid major losses in the up-coming November elections:

The debate over financial services regulation, which was engaged on the Senate floor last week and is expected to dominate Congress this month, is a template for the Democrats’ new game plan for rebranding and promoting some of their longstanding initiatives.

Whether bills have been considered thoroughly, and through the regular order, is a better yardstick by which to measure than length.

Why Congressional Bills Are So Long

Historian John Steele Gordon thinks he knows:

One reason, I cynically suspect, is precisely to make them unreadable...The political elite would rather work in the dark and is confident that the Washington press corps won’t go to the trouble of actually reading a bill that’s longer than War and Peace (and a lot less entertaining). As a political public-relations man once told me, “Nobody ever went broke underestimating the work ethic of the average reporter.”

But there are two other reasons. One is that a vast bill makes it easier to sneak in clauses that go unnoticed until they are law...The second reason is Washington’s increasing fascination with global reform rather than piecemeal reform. Only touchdowns, it seems, are now allowed in the game of political football; moving the ball down the field just won’t do.  The health-care debate would have been a lot shorter and a lot less politically divisive had both sides simply agreed to enact those reforms that a substantial majority of each house agreed with — such as of insurance abuses — and then saw what else was needed. Regulating derivatives would be a piece of cake if it were not tied to “financial reform” in general.

From my own experience in writing legislation (10 years in Congress), I'd say that Gordon, who is an excellent financial historian, has it mostly wrong.  

No one ever told us to write bills longer on purpose.  I'd say of the causes he identifies, the last (a preference for global over piecemeal reform) is the soundest.  The reason have more to do with the increasing size of the congressional agenda and the diminishing floor time, meaning that you can't do several bills on one topic any longer.  Once a financial reg bill is done, Congress won't want to take it up again, so everything needs to be loaded into one package.