Conventional wisdom amuses me in the way that watching a child’s soccer game amuses me. Before the Tuesday election, not one pundit could probably explain to you the nature of Blanche Lincoln’s derivatives title for the Wall Street reform bill. Now they’re all convinced that her election will ensure its inclusion in the final package.

First off, we have to define terms. The Lincoln derivatives title as a hole is far less leaky than the House version of the bill. More swaps will be traded on exchanges or through clearinghouses. Less end-users will be exempted, though that number is not zero – there are still some significant exemptions in the Lincoln title. There’s a big old loophole in her title that would allow uncleared swaps to still trade and gut enforcement of the rules, but I’m now told that will probably get fixed in conference. Barney Frank has said he regrets his chamber’s derivatives title, and the conference will use the Senate bill as a base. So in those respects, some of what Lincoln put her name on – she didn’t write it – is likely to remain.

When most people are talking about “the Lincoln derivatives bill,” however, they’re talking about Section 716, the provision to spin off the lucrative swaps trading desks away from banks that receive government subsidies in the form of depositor insurance and access to the discount window. That’s basically what’s being discussed in the WSJ article:

Ms. Lincoln wrote a controversial provision in the bill that could force banks to spin off their lucrative derivatives-trading operations. Bankers and many lawmakers assumed the provision would wither once Ms. Lincoln lost her primary—or even if she won, given the diminished political imperative to look tough on Wall Street.

But her victory appeared to have the opposite effect, with Democrats saying her standing is now strengthened, particularly as it appears the populist provision resonated with voters.

“We’re going to work hard to keep it in,” Ms. Lincoln said after leaving a meeting Wednesday in which she was loudly applauded by fellow senators.

“It appears the populist provision resonated with voters.” That’s hilarious. Does anyone really think that Blanche Lincoln’s nomination rested on a section of a bill she wrote which nobody outside of financial experts can truly describe? Blanche Lincoln and her campaign didn’t; in her ads, she took credit for the whole bill. Yes, being anti-Wall Street may have helped her campaign, but go find me 10 Arkansans who can define “swaps trading desks” for me. Good luck on your search.

This is one situation where the Washington bubble might actually help matters. The only support for Section 716 which has grown in recent days is institutional; the WSJ notes that Thomas Hoenig of the Kansas City Fed now supports the measure, and Dick Durbin touted it (he was always in favor). There’s a belief that this provision means something to the country at large which I wish was true, but I don’t quite believe it. Nonetheless, that perception is driving these reports today.

But everyone’s coming to this late. Section 716 basically has already been cut. The “grand bargain” is to use the Volcker rule as the mechanism for separating risky trading from the real economy. This is certainly Treasury’s take, and the view of the leaders of the conference committee, who in all these reports are completely noncommittal (because they know it’s a done deal):

Senate Banking Committee Chairman Chris Dodd (D-Conn.), a skeptic on the Lincoln plan, called it a “strong provision” and said she “was on the right track.” He did not, however, agree with his Democratic colleagues Wednesday who said Lincoln’s election win would make it harder to eliminate the provision.

And Frank, who is chairing the conference committee, gave no indication Wednesday of where he intended to steer the House-Senate conference on the issue.

“Everybody recognizes that it’s a conference process, and it’s going to be a collegial answer in the end,” Frank said. “It’s also the case, in many instances, [that] the question is not whether but in what form.”

Even the progressives in the conference committee, like Luis Gutierrez, talked about “a strong Volcker rule” in public statements, not Section 716. Given the confusing nature of the whole concept of derivatives, you can bet that Lincoln will come out of this saying she fought for and got “tough provisions on Wall Street,” and the conferees will give her space to say so.

There’s only one way that Section 716 survives – if three or four Senate Democrats like Tom Harkin, maybe Maria Cantwell, and some others lay in the middle of the road on the tracks and say they’ll kill the bill without it. I agree that increased tightness of the Volcker rule may end up costing the banks money, but it should not be seen as a substitute for 716. Read Joe Stiglitz to understand why.

We need to wall off the most toxic trading activities, and make sure they are properly capitalized, and we need to be redundant about it. The Volcker rule is nice, but even a strengthened one is likely to be open to regulatory discretion. All financial rules have a half-life, and so fortifying them makes perfect sense. Section 716 is at the heart of a more sound financial system, and nobody should let Blanche Lincoln get out of conference committee without it.