The politics of banking reform

I've accused Krugman of ignoring political realities in the past, but on this I think he's right.

Let me conclude with a political note. The main reason for reform is to serve the nation. If we don’t get major financial reform now, we’re laying the foundations for the next crisis. But there are also political reasons to act.

For there’s a populist rage building in this country, and President Obama’s kid-gloves treatment of the bankers has put Democrats on the wrong side of this rage. If Congressional Democrats don’t take a tough line with the banks in the months ahead, they will pay a big price in November.

And reports like this don't help.

There seems to be some misreading of "voters' moods" around the country in which it is assumed that the president's party is going to take a massive hit in the Fall. I think that thinking can lead to self-fulfillment if Democrats aren't careful. Truth is, there is a deep anger at the elites in Washington and in the financial sector who helped to create the atmosphere of greed and self-enrichment that's left millions unemployed and millions more falling further and further behind economically. Democrats need to take advantage of that mood -- and the fact that Republicans will try to obstruct anything they do -- to push serious reform on the financial institutions that were on the verge of melting down in 2008 and would have done so without massive infusions of taxpayer dollars. Then remind voters in the Fall that it was under a Republican administration that the collapse occurred and that Republican politicians are uninterested in reining in those financial institutions.

I haven't written much about Chris Dodd, even though I live in the Nutmeg State and have long been a big supporter of his, other than to note that State Attorney General Blumenthal should have a far easier time holding the seat for Democrats than Dodd would. In deciding not to run for reelection Dodd did the right thing for himself, the party, and the country. The question now becomes will he feel even more free to usher in real financial reform, or will those who oppose reform be able to run out the clock on Dodd's term?