He just can't win.

In our interview with U.S. Sen. Maria Cantwell last week, one criticism she had of President Obama's plan for banking industry reform—something she's hot on—focused on his pitch for something called the Volcker Rule, which would regulate, "proprietary trading"—a way to restrict how banks play the market.

Cantwell told us she doesn't think the idea has enough teeth, and she would rather just reinstate the Depression-era Glass-Steagall Act, which puts an Iron Curtain between commercial and investment banking.

PubliCola: Does the Obama administration support it [Cantwell's push to separate commercial and investment banking]? 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.’

But alas. According to a front-page New York Times story this week—"In a Message to Democrats, Wall St. Sends Cash to G.O.P."—Obama's proprietary trading proposal is too radical for the banks, and it's casuing Democrats to lose their fundraising advantage on Wall Street.

Mr. Obama’s fight with Wall Street began last year with his proposals for greater oversight of compensation and a consumer financial protection commission. It escalated with verbal attacks this year on what he called Wall Street’s “obscene bonuses.” And it reached a new level in his calls for policies Wall Street finds even more infuriating: a “financial crisis responsibility” tax aimed only at the biggest banks, and a restriction on “proprietary trading” that banks do with their own money for their own profit.

“If the president wanted to turn every Democrat on Wall Street into a Republican,” one industry lobbyist said, “he is doing everything right.”

...

Mr. Wolf was the only Wall Street executive on the panel and became the board’s leading opponent of what became known as the Volcker rule against so-called proprietary trading, according to participants. Such trading did nothing to cause the crisis, Mr. Wolf argued, as the industry lobbyists do now.