Bailout

Regulatory reform goes to the full Senate

By Felix Salmon

Back on March 11, when Chris Dodd put financial reform on a forced short timetable, I said that “financial reform is not dead yet: we?ll have a much better idea at the end of next week what its real chances are”. Well, that date has been and gone, and now a bill with no Republican support has been pushed through the Senate banking committee in a move that Bob Corker called “pretty unbelievable”. And yet, reform is still not dead: Dick Shelby, for one, sounds reasonably constructive when he says that “we’re not going to the floor polarized; we’re going to the floor right now in the spirit of trying to work a consensus bill, a meaningful, substantive bill that I’ve said all along that we need.”

Daniel Indiviglio thinks that means we’re in for “a wild battle”, even as Tim Geithner tries his hardest to make the conservative case for reform. And here’s his analysis of the political calculus:

Dodd can’t pass this bill without at least one Republican. He might believe he has a better chance at luring non-Banking Committee Republicans to vote for the bill with fewer changes than would have been necessary to get Republicans on the committee to go along. And he could be right. But I’m not at all convinced that he’ll necessarily have all 59 Democrats with him, so he may very well need several Republicans to come to his side. After all, even in the more liberal House, financial reform only passed by five votes, despite that chamber’s much stronger Democrat majority.

I suspect this is right. It’s not that there’s any chance of a bill passing with multiple Republicans supporting it even as a handful of Democrats vote nay. Rather, it’s that a handful of Democrats are only going to vote aye if there’s non-trivial Republican support for the bill. Or to put it another way, don’t expect this bill to pass with 60 or 61 yes votes. If it passes at all, it’s going to have more than that. And the route to getting the support of a decent minority of Republicans is still via Dick Shelby: the whole interlude of flirtation with Corker now seems, with hindsight, like it was a complete waste of time.

Full post as published by Macroprudential on March 23, 2010 (boomark / email).