Josh Feit (publicola):Getting her footing in the Senate just as the Enron debacle was blowing up in the early 2000s, Cantwell found her niche drawing up wonked-out policy from a lefty perspective to protect energy consumers and energy markets. Cantwell spent the first several years of her Senate career doing obscure, yeoman’s corporate accountability work, like passing the Commodities Future Modernization Act to regulate energy derivatives. (And her nerdy but righteous toiling continues: During last year’s health care squabbles, she locked in an unsung corporate accountability amendment to regulate pharmaceutical profiteering by pharmaceutical benefit management companies, PBMs.)However, as the Democrats struggle to respond to Wall Street wrongdoing and the great recession, Cantwell’s detail-oriented populism has suddenly turned her into a high profile and invaluable Senator for the Democrats—the “Most Valuable Senator” of 2009, according to the leftist mag The Nation.Cantwell sat down for a 20-minute interview with PubliCola yesterday to talk about her emergence as the Democrats populist all-star (or black sheep?) whose yearlong challenge to Democratic President Barack Obama’s economic policies has put the national spotlight on her banking reform message—a message that may be the Democrats’ only hope of warding off a major backlash from angry voters and Tea Partiers in November.
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PubliCola: I want to talk about the populist note you’ve been hitting nonstop lately. Voting against the bailouts, dressing down [Treasury] Secretary Geithner, voting against [Fed Chair] Bernanke last week—you’ve been consistently sending a message to the Obama administration that on economic policy, they don’t get it. Does President Obama just not get it on economic issues?
Sen. Cantwell: Well, first of all, I think that this is actually a message about competitive capitalism too. I believe in good old-fashioned American capitalism where you have true competition and transparent markets. And that you have money flow to IPOs to create new technology. If you’re spending all your money in dark derivative markets—and that’s more lucrative—then how are you really getting capital flowing to small businesses?
So while it may seem it’s just “populist,” it’s really about what’s made our country great. Getting capital and competition has made our country great. And if the big banks are too big, and they push the small banks out, and more and more concentration of big banks is the norm, that’s going to hurt the competitiveness and effectiveness of getting capital to small businesses.
PubliCola: Do you think that President Obama doesn’t understand that?
Sen. Cantwell: Well, I think the president said in his State of the Union that he is going to look for a strong bill on his desk or he’s not going to sign it when it comes to reg reform, and I thought that was a new commitment by him.
I do think he’s got members of his economic team who have been part of the past strategies that have failed, and I think they’ve got to be clear that they are for strong regulatory reform and for getting capital to small business not just getting capital to big banks.
PubliCola: Did he give enough specifics in his State of the Union about what he needed to see in that regulatory reform bill?
Sen. Cantwell: I thought he had a great speech. I thought the specifics about saying “And if it’s a weak regulatory reform bill I won’t sign it” and “If it isn’t strong enough I won’t sign it,” was good.
[Editor's note: It strikes me that Sen. Cantwell is being polite. Here's what President Obama said after running through some platitudes about "guarding against recklessness" and "middle class families hav(ing) the information they need to make financial decisions" :
"And if the bill that ends up on my desk does not meet the test of real reform, I will send it back until we get it right. We've got to get it right."
Super vague.
In contrast, asked for her own list of must have real reforms, Cantwell's office provided us with detailed specifics including: absolute separation between commercial and investment banking (reenactment of the Depression-era Glass Steagall Act); a cap on bank size by market share; all derivatives shall be traded and regulated through a central clearinghouse; and stricter standards governing market speculation like limits on aggregate positions across markets.]
Sen. Cantwell: My critique [of Obama's speech] is that the treasury responded very quickly to get access to capital to big banks, and yet it’s been over a year to get access to capital to small banks which is the conduit for small businesses to get lending. I personally believe, and several of my colleagues do, that they [the White House] can act now, they don’t need legislation to do that. They can design the program and get it out tomorrow. And so I don’t want to lose any more time because every day that goes by there’s more bankruptcies and they [small businesses] are just as important in trying to solve the problem in dealing with what we dealt with a year ago. More than a year ago.
PubliCola: Did you hear from the White House after you went on MSNBC and said you weren’t sure why Treasury Secretary Geithner still had a job?
Sen. Cantwell: Yes.
PubliCola: What did they say?
Sen. Cantwell: They just wanted to know what my concerns were. And I told them my concerns were about getting a strong regulatory reform bill and getting treasury to support that instead of supporting loopholes. And they wanted to see exactly what I was talking about, and we sent them the documents where treasury earlier had said that these were the reforms they were going to support, but then, when the House came up with a weaker bill how Treasury had weighed in in support of the loopholes.
PubliCola: What was the White House response to that?
Sen. Cantwell: Well, we’re going to see when the Senate takes up regulatory reform whether the White House will help us get a strong bill.
PubliCola: Two-thirds of U.S. senators are millionaires, 68 senators are millionaires. Do you think the U.S. Senate understands the economic problems people are facing? Is this a problem for getting real reform?
Sen. Cantwell: I don’t think it stopped Ted Kennedy and it doesn’t stop me. [With a net worth of at least $2 million, Sen Cantwell is 28th on the list of 68 Senate millionaires.] It’s about digging in on what some of these issues are. Consolidation of banking is going to create continued havoc if we don’t fix this.
PubliCola: The Tea Party is currently seen as the country’s populist movement. They’re mad at Obama on economics. They’re mad about the bailouts for the fat cats. These are the issues you’re touching on. How is your populism different than theirs?
Sen. Cantwell: Are they for strong regulatory reform? Because I haven’t seen that yet. And when Scott Brown was asked whether Wall Street should help pay back some of the money, he wasn’t for that. So, I’m not sure exactly what they’re saying on that front. But I know this: There are many Democrats here—and many people on a bipartisan basis—who want the reinstitution of Glass-Steagall, the separation of investment banks and commercial banks. I haven’t heard the Tea Party call for that.
PubliCola: But the Tea Party has captured this Main Street anger and it’s also something you’re speaking about right now, and I’m trying to differentiate your pos…
Sen. Cantwell: Yeah. The Democrats should be loud and clear that we want competition in banking, that we’re not for the consolidation of big banks, that we’re going to be for reform, that we’re going to be getting access to capital to small business, that we’re going to have competitive models because basically large scale monopolies choke things like access to capital and true competition. Let’s see how many Republicans fight for those real reforms.
PubliCola: You teamed up with Republican Sen. John McCain on Glass-Steagall. Why didn’t you team up with 58 Democrats or the President? Do they really support it?
Sen. Cantwell: There are several other Democrats on the bill—my colleague Sen. (Ted) Kaufman from Delaware and Sen. (Bernie) Sanders [an Independent from Vermont], and Sen. (Barbara) Boxer (D-CA) , and I think Sen. (Russ) Feingold (D-WI). So, I think we have a good group of people who are supportive of that concept, but we’ve got a lot of work to do because there are a lot of bank lobbyists up here telling people not to support that kind of legislation.
PubliCola: Does the Obama administration support it? I felt like the President gave a vague nod to it in his State of the Union when he said he didn’t want the financial markets messing with people’s savings. Was that a reference to what you and Sen. McCain are pushing?
Sen. Cantwell: I think he was referring to something he came out with called the Volcker Rule, which would say that commercial banks could not do proprietary trading. The problem with that is that the definition is too narrow about what proprietary trading is. There’s a bunch of people, like The Economist, who’ve said you can’t do that, it’ll just be a bunch of loopholes. Even the Goldman Sachs people are like, ‘Oh, we can’t do it that way? We’ll just keep doing it this way.’
So, I think it’s cleaner just to say investment banking and commercial banking are separate. They’re two separate things. One is about risk and taking risks, and the other is supposed to be about securing deposits. I think it’d be cleaner to go back [to Glass-Steagall]. So, we’ll see. The White House kind of said, ‘We’ll see what Congress comes up with.’
PubliCola: The White House acknowledged they were caught of guard by the Scott Brown win in Massachusetts . Were you surprised?
Sen. Cantwell: Lots of things can happen when you have a short [race] like that. And obviously, something happened. [Laughs]. I think [Democrats] have to be keen on what our fiscal policies are and the effectiveness of them. Looking at exit polls, voters really were uncomfortable about the economic situation. So, I think that’s where we should be focusing, and I think the president is turning his attention to that.
PubliCola: Are you going to watch Sarah Palin’s speech on Saturday?
Sen. Cantwell: I don’t. Believe. I will be. … But I bet you it’ll be somewhere replayed.
PubliCola: There’s a lot of speculation that the Democrats are facing a real populist backlash in November 2010. Do they need to get on board with your populist message to avoid that?
Sen. Cantwell: I think as I said before this is about investing in good-old fashioned American capitalism by having competition and having access to capital from a lot of different sources, and having a lot of people get access to capital not just a few, and I think that my colleagues who see this and understand it —like Diane Feinstein (D-CA) or Carl Levin (D-Mich)—I think are going to be effective when we come to the floor when regulatory reform comes up.
PubliCola: But aren’t regulations exactly what people like the Tea Party activists are complaining about? That things like health care reform, the public option, actually destroy competition? And that’s what they’re nervous about with the Democrats … that there’s this expanding government?
Sen. Cantwell: Well I think [Washington State's] basic health plan has driven down costs to the state government and to everybody by getting a population that had been previously uninsured … insured. And that’s been a big benefit.
We had a bunch of people who were in our office who I think were with one of the Tea Party things, and they came by to see me. And they were saying how they didn’t like this about health care reform and they didn’t like that. And I explained what we were trying to advocate for … how the Northwest needs a better Medicare rate because we’re doing good efficient work, and we should be rewarded for that instead of being punished.
And I brought up the Basic Health Plan. And this woman who was there said, ‘the Basic Health Plan? I love the Basic Health Plan.’ And I said well that’s what I’m talking about.
There are good ideas about how to do cost effective health care without giving big tax subsidies to the insurance industry. And that’s what Democrats should be saying.
PubliCola: You’re not on the banking committee. Yet you’re the one who’s introducing a lot of the banking reform bills. Why has it fallen to you. Does the Democratic leadership and the committee not get this? Are they beholden to the banking industry? What’s the issue there?
Sen. Cantwell: I guess I had a five-year tutorial on this with Enron. That taught me a lot on what to look out for on derivatives.
PubliCola: So did the banking committee come to you? Or did you say, I’ve seen this before, and you went to the banking committee?
Sen. Cantwell: Since 2001 or 2002, we’ve been trying to shine a light on these kind of manipulations. We started with derivatives legislation with Sen. Feinstein and I trying to close the Enron loopholes. And so that was why I felt like we were a little more ready [in 20008] to also talk about why TARP (Troubled Asset Relief Program) in general, turning the keys over to these people, was a bad idea. That we shouldn’t be picking winners and losers. We should be creating an equity program that was clear and that people could take advantage of it. Banks could decide. They could say yes we want to survive and we want to take advantage of that or they could say no we’re going to fail. But instead, we went around picking winners and losers.
PubliCola: Do you and your staff have a nickname for Tim Geithner?
Sen. Cantwell: No. No.
PubliCola: Do you have anything nice to say about Tim Geithner?
Sen. Cantwell: Well, I think, [pause] um [long pause] … I think the Treasury Secretary is, um [very long pause] …. um … earnest, in saying at hearings that he wants to work on getting capital to small business, but I don’t know that he understands the urgency of it.
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