The governing party faced an awkward dilemma. People were hurting and furious at the government's generous bailouts for banks. But how could the Democrats do something for the folks without upsetting their friends and patrons in the banking industry? Democrats think they found a way. They are enacting a series of measures described as "breakthrough" reform and "unprecedented" defeat for the bankers. Only these achievements are more accurately understood as "reform lite." The house is on fire and Democrats brought a garden hose.

The Democratic Party is changing in some promising ways, but what's impressive is how much it has not changed. Does that sound harsh? I am relying on private judgments from Washington players regarded as the "white hats" on this subject--consumer lobbyists and other public-interest reformers, who for years have labored in frustration to enact laws that would restore equity and honest relationships to the out-of-control financial system. These organizations mostly endorse the Democrats' efforts and celebrate their "victories." But a few minutes of private conversation reveals their doubt and disappointment. "It's a good bill," they will say, then after enumerating the shortcomings add, "It's better than nothing."

"This has to be on background, OK?" one of the reformers said. "This crisis brought down the world economy and yet Congress still hasn't passed a bill making sure it doesn't happen again."

Julia Gordon, a lawyer with the Center for Responsible Lending, did not seek anonymity. "We have reached the moment to ask ourselves Rabbi Hillel's question: if not now, when?" Gordon said. "I fear we are letting this crucial moment pass without putting forward-looking rules in place to fundamentally change how mortgages are made and prevent predatory lending. Plus, when we look back at the foreclosure tsunami that devastated so many families, we're going to be ashamed that we did not fix the bankruptcy code to permit mortgage modification. That move alone could have prevented more than a million foreclosures, and while I predict we will revisit the issue in the future, it will be like closing the barn door after the horse has died."

If not now, when? That question ought to haunt the Democratic Party and President Obama, who has been missing in action himself on key issues. Congressional Democrats are responding to this epic conflagration with the same risk-avoidance tactics they learned during many years in minority status. In those days, they could always blame right-wing Republicans for blocking their good intentions. But whom do the Dems blame now that they have the White House and fifty-nine votes in the Senate and a seventy-eight-seat majority in the House? Their standard explanation for not doing more is, "We didn't have the votes." So when might we expect Democrats to achieve more? When they have eighty votes in the Senate?

The party's ideological intentions are being defined with greater clarity in these new circumstances, and so are the President's. It's still early, but the implications are ominous for other issues. If Democrats are reluctant to disturb the power of other major interests, it seems improbable that fundamental change will occur on healthcare, energy conversion or the restoration of work and wages. The problem now is the Democrats, not the Republicans. The party aids and protects its free-roaming entrepreneurial politicians and does not punish those who undermine the party's larger promises. When Republicans were in charge, they enforced party loyalty with Stalinist discipline. Democrats are the party of safe incumbents, weak convictions.

The much-celebrated "Credit Cardholders' Bill of Rights" is a fresh example of how the Democratic Party tries to have it both ways--avoiding the tough votes while mollifying the folks. The credit card reform measure imposes new rules on the industry and does away with many of the most outrageous gimmicks bankers use to extract more money from debtors. Banks cannot raise interest rates retroactively on old credit card balances or pile on hidden fees or fail to give advance notice for rate increases. These and other changes are worthy.

The achievement seems less courageous if you know that Congress was largely ratifying the regulatory rules already adopted by the Federal Reserve last year. Or that the legislation gives the industry another nine months to gouge their customers before the new rules go into effect. Or that Visa and MasterCard, Citigroup and JPMorgan Chase are free to raise future interest rates to the sky--without limit. That is the industry's intention, as bank lobbyists reported after the bill was passed.

American Usury

One of the fundamental issues that party managers wished to avoid was the scandal of American usury. Usury is the ancient sin of charging inflated interest rates sure to ruin the borrowers. It is considered immoral by Judaism, Christianity and Islam because usury involves the powerful using their wealth to ensnare weak and defenseless borrowers. The classic usurer offers an impossible choice that debtors cannot easily refuse. If they reject the terms of the loan, they will not be able to pay the rent or buy necessities. If they accept the usurious interest rates, their debts will accumulate until they are bankrupted (at which point the creditors claim their property). No civilized society can endure in such conditions.

Usury used to be illegal in the United States but it was "decriminalized" in 1980--the dawn of financial deregulation. A Democratic president and Congress repealed all interest-rate controls and the federal law prohibiting usury. Thirty years later, American society is permeated with usurious practices--credit cards charging 30 percent and higher, subprime mortgages and other forms of predatory lending, the notorious "payday" loans that charge desperate working people an effective interest rate of 500 percent or more. Businesses, especially smaller firms, are also prey to usury in less direct ways.

Needing credit to survive, they submit to the creditor's demands and are often weakened as a result, shedding workers and services that shrink customers and income.

The straightforward way to stop usury is to enact a hard legal limit on the interest rates creditors can charge borrowers. In the House, several legislators introduced interest-rate caps, but party leaders would not let the issue get a roll call vote. Rep. Maurice Hinchey of New York and co-sponsors proposed an interest-rate cap of 18 percent, the same ceiling enacted years ago for credit unions. "Offering the amendment raised a lot of anxiety on the part of a lot of people," Hinchey said.

"It was withdrawn because it had no possibility of success and it would have put a number of people in a tough situation. We had to back off."

A roll call on usury would have compelled legislators to choose between their constituents and their bankers. Rep. Donna Edwards of Maryland proposed a tougher ceiling on interest rates, but the House rules committee rejected her amendment. "Our constituents are so angry with the banks," she observed, "siding with credit-card companies would not be helpful to me, and I expect that's true in other districts." Bankers are contributors, so this is what members call "a money vote." A consumer lobbyist explained. "Let's face it," he said. "The main reason lots of members get on the House Financial Services Committee is because they want to raise money from the financial industry."

In the Senate, Dick Durbin of Illinois, the majority whip who rounds up votes for the party, introduced his own usury bill--a cap of 36 percent including the non-interest fees and charges. Durbin's bill also empowered state governments to set lower limits. The Consumer Federation of America endorsed it, but the consumer lobbyists asked Durbin not to have a roll call on his measure because it might reveal their weakness.

Nevertheless, the redoubtable Bernie Sanders of Vermont demanded a vote on his bill--an interest-rate cap of 15 percent.

"When banks are charging 30 percent interest rates, they are not making credit available," Sanders said. "They are engaged in loan sharking." Sanders lost, 33 to 60. Twenty-one Democrats voted with the sharks. Senators Carper, Cantwell, Byrd, Bingaman, Bayh, Baucus, Akaka, Warner, Tester, Stabenow, Specter, Shaheen, Pryor, Ben Nelson, Bill Nelson, Murray, Lincoln, Landrieu, Kaufman, Johnson, Hagan.

The scandal of "payday" lending is being confronted by numerous state legislatures, but the issue stalled out in Congress. The industry pursued a race-based lobbying strategy that targeted black and Hispanic representatives with this pitch--poor people need these loans; don't mess with them. Rep. Luis Gutierrez of Illinois proposed a bill that usurers found acceptable--an interest rate cap of 390 percent.

Standing With the Sharks

Perhaps the most revealing moment for Democratic timidity was the Senate roll call to authorize bankruptcy judges to intervene on home foreclosures and reduce the burden for failing homeowners. If the bankers refused to make a deal, the debtors could take them into bankruptcy court and hope for better terms. This single reform would shift the balance of power modestly from creditors to debtors and save at least 1.5 million families from foreclosure, reformers estimated. The measure passed easily in the House, but was defeated by the Senate.

Bankruptcy reform lost because twelve Democrats joined the Republicans to vote for bankers and against embattled families. Senators Baucus, Bennet, Byrd, Carper, Dorgan, Johnson, Landrieu, Lincoln, Ben Nelson, Pryor, Specter, Tester.

Dick Durbin could not conceal the bitter aftertaste. He told a hometown radio interviewer: "Hard to believe in a time when we're facing a banking crisis that many of the banks created--they are still the most powerful lobby on Capitol Hill. And frankly, they own the place."

Durbin's disappointment may have included the former Illinois senator whom he had championed for president. Barack Obama took a walk on reform. Last year as a candidate, Obama declined to support the bankruptcy provision for the financial-bailout legislation, but he promised reform groups he would support it if elected. The White House wouldn't let reformers include it in the stimulus package or in Obama's first budget. The White House suggested the issue could proceed as a stand-alone measure (guaranteed to fail). On this important reform, the president stands with the sharks.

The Democratic Party ignores its left-liberal-progressive base with some regularity because it knows it can. Politicians understand they will suffer no consequences afterward. The galaxy of mediating organizations, including organized labor, that surrounds and supports the party may stomp and holler, but they do not attempt any retribution that might alter their relationship with power. Reform organizations will not withdraw their support, either money or rank-and-file voters. Nor will they seek to punish any of the wayward Democrats who regularly vote against them with opposition at the next election. The "white hat" reformers are Washington insiders themselves, with a seat at the table and influence on the substance of the party's agenda. They do not want to put their status at risk. Politicians know this from long experience. So do the reformers.

The warped dynamics of the Democratic Party may have sufficed when the GOP was ascendant and the goal was restoring a Democratic majority. But now the majority party resembles a dysfunctional family, badly in need of outside intervention. I say this with sympathy, having known and admired many of the reform activists for many years. Some of them are suffering from a political version of the Stockholm syndrome. Their good intentions are brutally compromised by identifying with the limited imagination and nerve of the Democratic Party.

In some ways, the politicians are prisoners too--captives of the money politics and the expensive mass-marketing that requires them to raise so much money and thus rely on the moneyed interests. Representatives and senators know how the system works and what they need to do to survive. Now and then, they may try to win one for the folks, but mostly they are resigned to the confinements of the status quo. So long as activist groups will make no attempt to break out of this pattern or penalize incumbents for disloyalty, the party will continue to stiff the faithful.

Moral Awakening

Given all the adversities facing the country, I conclude that meaningful "intervention" is plausible only if it originates with people at large who are more distant from power. I envision the intrusion coming from many "independent formations" free to ignore Washington's insider routines and mobilized by citizens on behalf of their own convictions, their common-sense ideas of what needs to be accomplished. This alternative path is a central theme of my new book, Come Home, America. I describe (somewhat wishfully) how self-directed organizations might develop the power to break through regular politics and overcome the usual barriers.

These groups could function, not as a third party nor as standard "issue" advocates, but as a mixture of these capabilities. They could act like free-roaming guerillas who educate and agitate; like a political party that selectively destabilizes safe-seat incumbents by entering party primaries or running independent challengers; like a representative organization that can demand political relations through direct confrontations or even civil disobedience. This development sounds implausible, I know, especially in Washington. But our crisis demands a more aggressive response from citizens--something that threatens the power of both parties and makes them insecure.

As it happens, a rough facsimile of what I envisioned is arising now in the politics of financial reform. A network of fourteen community organizations, based in cities from Boston to Washington, DC, and across North America, has come together in alliance and intends to force a moral awakening on the narrow thinking of the status quo. These citizens are developing a political-action agenda around one theme--usury--as the efficient expression of the abuses and injustices associated with banking and finance. These are interfaith organizations affiliated with the Industrial Areas Foundation and composed of citizens who are white and black, affluent and working poor, whose local organizations are based in churches and synagogues, Catholic, Protestant, Jewish, Muslim and others.

Usually, their political action is local and succeeds regularly in building relations with public officials that produce real change in communities. This time, given the crisis, these IAF groups are attempting something they have not done before--building the voice and influence to join the national debate and change its terms. I sat in on one of their organizing meetings near Baltimore and was asked to contribute my views on the shape of the problem.

"Are you ready to be born again? And again? And again? Do you have the imagination? Do you believe it?" The call was from the Rev. Hurmon Hamilton of the Roxbury Presbyterian Church in Boston, and he inspired the 100 or so community leaders. "Faith is the substance of things hoped for," Hamilton declared, "the evidence of things unseen."

Outlawing Usury

The Rev. David Brawley of East Brooklyn Baptist described a preliminary statement of basic principles. "Reasonable interest rates," he said. "In this financial culture, the nation will return to a time-honored, indeed ancient, practice: the law against usury. Financial institutions and mechanisms that participate in this culture will agree to a maximum of 9 percent interest or so. This was the usual state-mandated rate before the repeal."

Brawley described other principles with radical implications. "The lender holds the loan," he explained. "The financial institution that makes a loan holds the loan for its duration. The borrower and lender enter into a long-term relationship that ends when the loan is fully repaid. This is the fundamental starting point for any return to accountability." That statement of principle challenges the market securitization of mortgages that falsely claimed to reduce risk by dispersing it among many investors. The process instead left no one responsible for sound lending and thus multiplied the costs of failure.

Brawley's final principle was perhaps most threatening to the existing order. "The federal government insists on these core characteristics as the criteria for all further bailout funding. Banks that wish to borrow from the government must accept these simple standards [and] provide consumers with an alternative to the current monopoly of financial transactions dominated and still dictated by the same fifty financial institutions that caused the crisis."

In other words, the social standard of usurious practices should define which banks and financial firms are eligible to participate in all forms of government aid and protection. Why should taxpayers finance the usurers who are injuring the society? The government's undiscriminating approach to aiding banks implicates everyone in supporting the usury. So do the banks and brokerages that collect people's savings and channel the money into usurious practices that produce greater returns by ruining more borrowers. The moral standard poses difficult questions for everyone, not just bankers and politicians.

Arnold Graf, national organizer for the IAF, argues that the moral question can lead people to confront a deeper debate about the future. "What is the kind of society we want to have?" Graf asked. "That's really what we want to talk about--transforming the society. We're not going to get transformation form the president and Congress. It can only come from the people themselves."

These IAF organizations expect to try different tactics to spread the message and engage the people with power who make decisions. That means directly confronting elected representatives but also the banking institutions with famous names. The alliance hopes the moral principles will mobilize people of faith but also students and workers and investors. Following the example of the civil rights movement, people of conscience have to find ways to turn up the heat on the established order and discomfort the silent citizens who are passive and indifferent. This effort, Graf assumes, will probably take years, not months. Leaders of the community organizations are aware of the risks. They are attempting a leap into the unknown and they might fail. No one listens, nothing changes. They accept the risk because they too have asked Hillel's question. If not now, when?