Bailout

Financial reform in the Senate

By Felix Salmon

I’m more than a little confused about the political jostling surrounding the financial-reform bill in the Senate. In the wake of Chris Dodd giving up talking to Dick Shelby and deciding to work with Bob Corker instead, he’s put out a statement saying that “I am more optimistic than I have been in several weeks” about the prospects for the bill, and Daniel Indiviglio is surely right when he says that “it’s definitely a significant development that even one Republican is willing to work with Dodd”.

At the same time, however, Judd Gregg is also surely right when he tells Reuters that “this really isn’t a partisan issue”. Democrats have historically been just as craven when it comes to the banking lobby as have Republicans — arguably more so, in many cases. And with some tough elections coming up and some very large campaign contributions at stake, many Democratic Senators would probably quite like not to anger the banking lobby too much between now and November.

I do wonder how we got to this point: how is it that the Republicans, who rail against Wall Street just as much as their opponents, can’t seem to get behind a bill? By all accounts the sticking point is the Consumer Financial Protection Agency: Gregg has gone so far as to call it “the only really big philosophical difference here”, and Corker doesn’t seem to be particularly constructive on that front: he says that “Senator Dodd and I have agreed to set that topic aside for now”.

What I fear is that if Corker and Dodd can come to agreement on what Corker calls the “technical issues” at the heart of what is sure to be an enormous bill, Dodd will be forced to drop the CFPA lest he see the entire bill disintegrate. And I have no idea how you could possibly reconcile a Senate bill sans CFPA with a House bill which has a CFPA front and center.

I also wonder about the implicit 60-vote supermajority which Dodd seems to think he needs to get anything passed: is that strictly necessary? Are there really Republicans who would stick their neck out and filibuster a financial-reform bill aimed at reigning in Wall Street? Voting against it is one thing, but killing it with a filibuster is surely not a vote-winner anywhere in the US right now. Certainly the rhetoric coming from the likes of Gregg doesn’t suggest to me that the Republicans are in any way philosophically opposed to any bill along these lines being passed.

But this is all Washington politics, which always confuses me greatly: my colleague Jim Pethokoukis, who understands it much more than I do, has already advanced a chess move or two and decided that Mitch McConnell is now the Republican in the driving seat. In any case, what’s clear is that we’re not in the much more simple world of the House, where Barney Frank reigns more or less supreme. Dodd, who’s not standing for re-election, is quite independent at this point and isn’t necessarily going to work as closely with the White House as Frank did; meanwhile, the Republicans seem to be in a position of considerable power, while having very little in the way of a coherent idea of what exactly they want to achieve or block.

So, it’s still a mess, and it’s far from obvious whether there’s anybody at all in the Senate who has the power and determination to push once-in-a-generation legislation like this through. I’ve been pessimistic throughout this process: after decades of getting exactly what they want, I just can’t believe that the banking lobby is now going to end up getting exactly what they don’t want. I’m pessimistic still. But at least the Corker news keeps a glimmer of hope alive.

Full post as published by Macroprudential on February 12, 2010 (boomark / email).