Regnat Populus

Jonathan Chait writes:

I've expressed some skepticism that Blanche Lincoln is the sort of Democrat who should face a liberal primary challenge, given that she represents an overwhelmingly conservative state and votes for health care reform. But the primary challenge sure seems to be paying dividends. After initially favoring derivatives, Lincoln has gone full populist:

The proposal by Sen. Blanche Lincoln (D-Ark.), who chairs the Senate Agriculture Committee, is sending shudders through Wall Street. For nearly two decades, five U.S. banks -- J.P. Morgan, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup -- have acted as middlemen allowing commercial firms and financial speculators to trade vital goods such as oil, natural gas and cotton as well as contracts called derivatives. These are essentially side bets on which way such commodities, stocks and other assets move.

Under Lincoln's proposal, as described by her aides, Wall Street firms would have to spin off this activity if they want to remain banks.

Lincoln's plan goes further than what the Obama administration has sought.

Of course the catch comes in November, though I'm not sure what it will prove -- the Democrats are very likely to lose that seat regardless of what happens in the Democratic primary.

Meantime, Democrats now look like they hold a very, very strong position on financial regulation. They're demanding a strong bill -- stronger than they were demanding last year -- and they almost seem to want Republicans to block it. Of course, the best way to obtain bipartisan support is to be willing to go without it and attack the other side.