After 9 months of hard fighting, yesterday financial reform came down to this: an amendment, proposed by Senators Jeff Merkley and Carl Levin that would have forced big banks to get rid of their speculative proprietary trading activities (i.e., a relatively strong version of the Volcker Rule.) 

The amendment had picked up a great deal of support in recent weeks, partly because of unflagging support from Paul Volcker and partly because of the broader debate around the Brown-Kaufman amendment (which would have forced the biggest 6 banks to become smaller).  Brown-Kaufman failed, 33-61, but it demonstrated that a growing number of senators were willing to confront the power of our biggest and worst banks.

Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote.  Why?

Partly this was because of procedural maneuvers.  Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote.  Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.

Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership - and from the White House.  Again, the long reach of Wall Street was at work.

But the important point here is quite different.  If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated.  That would have been a clear victory for the status quo. 

But Merkley-Levin had momentum and could potentially have passed - reflecting a big change of opinion within the Senate (and more broadly around the country).  The big banks were forced into overdrive to stop it.

The Volcker Rule, in its weaker Dodd bill form ("do a study and think about implementing"), perhaps will survive the upcoming House-Senate conference - although, because this process likely will not be televised, all kinds of bad things may happen behind closed doors.  Regulators may also take the Volcker Rule more seriously - but the most probable outcome is that the Fed and other officials will get a great deal of discretion regarding how to implement the principles, and they will completely fudge the issue.

Most importantly, everyone who wants to rein in the largest banks now has a much clearer idea of what to push for, what to campaign on, and for what purpose to raise money.  This is the completely reasonable and responsible ask:

1. The Volcker Rule, as specifically proposed in the Merkley-Levin amendment
2. Constraints on the size and leverage of our largest banks, as proposed by the Brown-Kaufman amendment

When the mainstream consensus shifts in favor of these measures, or their functional equivalents, we will have finally begun the long process of reining in the dangerous economic and political power of our largest banks.