What Dodd's Retirement Means For Financial Regulation

At noon today, Senator Christopher Dodd (D-CT) is expected to announce that he won't seek re-election. He's the chairman of the Senate Banking Committee. As you probably know, these days, that's a particularly important post. This year, it matters even more than usual, as the financial regulation push will make up a major part of Washington's efforts in 2010. Indeed, Dodd authored the Senate's financial regulation bill. Will his announcement have any effect on getting this legislation passed?

I think it could. Dodd will be a sort-of lame duck. As a result, his bargaining power will be diminished.

First, you might recall that his proposal is far more ambitious than what the House passed. I think you'll quickly see those lofty goals fade. It would have been an uphill battle in the Senate to pass something stronger than the House's version anyway. After all, he was already having trouble. Since he won't be around next year to follow through with deals made, logrolling will be even more difficult.

In fact, I think his imminent exit could even make it more challenging for the House bill to get through the Senate. As Banking Committee chairman, Dodd had a lot of clout in being able to grant favors and have other Senators wanting him on their good side. Even if his more ambitious regulatory proposals slipped through the cracks, he would certainly have planned to at least fight for what the House wanted. Today's announcement should knock his influence down a few pegs. That might make it even harder to get meaningful financial regulation through the Senate. And given the Senate's more moderate stance compared to the House, it wouldn't have been easy to begin with.

As I've said before, Congress will get some financial regulation passed eventually. But Dodd's decision to announce his retirement today should make the Senate a bloodier battleground in the legislative fight that's sure to ensue. It could even be more difficult than health care, particularly since there's now no clear and powerful leader in the Senate to push for financial regulation.