This morning, I got a puzzling press release from the Senate Banking Committee. Chairman Christopher Dodd (D-CT) explains that he and ranking member Senator Shelby (R-AL) have reached an impasse in coming to an agreement on what new financial regulation should look like. But Dodd is going ahead and drafting a final bill anyway. Huh? This isn't a good sign. Financial reform may have failed.
Here's the release, in its entirety:
WASHINGTON - Today, Senate Banking Committee Chairman Chris Dodd (D-CT) issued the following statement on the status of Financial Reform in the Senate.
"Last night, Senator Shelby assured me that he is still committed to finding a consensus on Financial Reform, but for now we have reached an impasse."
"While I still hope that we will ultimately have a consensus package, it is time to move the process forward."
"I have instructed my staff to begin drafting legislation to present to the committee later this month."
"I appreciate the good work that has been done to this point by Senator Shelby and the other Banking Committee members who have worked so hard in this process. Over the past two months we have had productive bi-partisan negotiations in a number of areas and I intend to incorporate many of those agreements in this new proposal."
If you find this confusing, you are not alone. As we've learned from the health care battle, without any Republican support, bills tend to die a slow death in the Senate. So if bipartisan efforts have failed -- which is what Dodd seems to imply -- then I worry this means financial reform has failed as well. Let me explain better explain how I derive this conclusion.
If Shelby isn't on board, then it's pretty likely Republicans at large aren't on board. That means any bill Dodd is finalizing will be a waste of his time, because Republicans will use their 41 votes to block it. That is, if it even gets out of committee, which isn't a given. I would say that this is merely political posturing on the part of Dodd, but since he isn't seeking re-election, I'm not sure what he has to gain by drafting a bill doomed to failure.
You can decide for yourself who to be disappointed with here. The left will obviously be angered that Republicans weren't willing to concede that financial regulation should look exactly like what the Democrats wanted. The right will argue, however, that the Democrats simply wouldn't compromise with Republicans.
In the hopes that some financial regulation gets done, somehow, I would prefer a piecemeal approach at this point. Why not just delay all of the very controversial stuff for now, and start with the easy stuff? For example, both Democrats and Republicans appear to agree that firms should not be bailed out. So how about compromising on some reasonable mechanism for quick, efficient resolution for giant non-bank institutions? Can't we also agree to raise capital requirements and/or lower leverage limits at least a little? Is there really much harm with a systemic risk council of regulators and economists that discusses market trends they're seeing? Even if it doesn't work to prevent financial crises, it probably wouldn't hurt. I suspect that it's the details that are getting messy, but at this point, something would be better than nothing.