Last week, I wrote about the financial reform battle in the Senate. It's shaping up to be a fascinating political struggle. Since then, I learned more about strategies being mulled over by Senate Banking Committee Chairman Christopher Dodd (D-CT) and Republicans to get a bill passed. All seem dedicated to the cause: it's just a question of how to get there.
Political strategy is exceedingly difficult to pull out of Congressional staffers, so I didn't have much luck in getting many on-the-record statements. But here's a summary of what I've managed to piece together. Just keep in mind that strategies are still evolving, especially on the Republican side of the aisle.
The No Mark-up Plot Thickens
I covered the decision not to mark-up the bill in the Senate Banking Committee in my prior post. I said that Dodd mostly drove the speed. I still think that's right, but I didn't adequately address what was going on in the Republican camp. They weren't all seeing the situation eye-to-eye. In particular, Senator Shelby (R-AL) wanted to forgo mark-up, while Senator Corker (R-TN) wanted to use the committee to revise the bill further. Ultimately, Shelby's strategy won out, and Corker was not pleased. But he now says that he will "fold in behind" the Republican leadership and work with them to pass a bill.
Making It Dodd's Bill
Shelby was convinced that offering amendments in committee would be a fruitless endeavor. He now may be seeking to work with Dodd to craft a broad bipartisan amendment to offer when the bill hits the Senate floor. If that happens, Shelby could potentially bring something like half of the Republicans in the Senate with him. From what I hear, the ideological divide between the two parties isn't as great as you might think -- nothing like it was with health care reform. If several changes are made, many Republicans could jump on board.
Dodd might really like this approach. It's his final term in the Senate, and there's little doubt that he'd love this to be his bill -- not House Financial Services Committee Chairman Barney Frank (D-MA) and Treasury Secretary Timothy Geithner's bill. Remember, even if Dodd loses half-a-dozen liberal Democrats, if he gets 20 or so moderate Republicans, a bipartisan bill will easily pass.
And if he gets bipartisan support in the Senate, it would be very difficult, politically, if the House and White House reject his changes -- even though they might be tempted to pull the bill further left. If they did, when the bill goes back to the Senate after conference, then those Republican votes would be lost and Dodd would have to hope a few decide to stick around.
If Compromise Doesn't Work
If Shelby and Dodd can't produce a bipartisan push, then neither Dodd nor Republicans will likely be pleased. That would mean that Dodd will be forced to pick off a few liberal Republicans to vote and essentially agree to the House/Treasury version. The bill would then ultimately contain very little of his influence.
So what are the issues that Republicans are most concerned about which might produce a bipartisan bill if Dodd agrees with some changes? Here are a few big ones:
I hear that Republicans are okay with the idea of a systemic regulator. But they don't like the idea that there will be a list of firms that this authority specifically regulates. The market may interpret these firms as still being too big to fail or being generally safer than smaller firms. Republicans may worry that these firms could still be bailed out and may have a competitive advantage.
Republicans also want the language in the bill to better ensure that the new resolution authority won't simply provide bailouts at its own discretion. In my reading of this section of the Senate bill, it doesn't appear to provide bailouts. Corker has also said he thinks this language is already strong enough. But other Republican leadership isn't satisfied, though I'm unclear on the exact changes they want to see here.
Consumer Financial Protection Agency (CFPA)
From what I hear, Senate Republicans aren't planning on trying to kill the CFPA. At this point, it sounds like they've accepted that this new agency or bureau will be created. Instead, they might fight for parity between the CFPA and the new systemic regulator. For some tasks, the systemic risk council requires a two-thirds majority, which means it might be difficult for this regulator to assert itself over the CFPA if there's some conflict. Republican might insist that consumer protection isn't given priority over systemic safety and soundness.
One wild card is derivatives. This section is not even finished yet, but Gregg is working on it along with Senator Jack Reed (D-RI). If they come up with something Republicans can stomach, their votes may follow. Of course, that assumes the new section will ultimately take the place of what Dodd had originally written, which is what passed in committee as a placeholder for the upcoming bipartisan section.
Finally, it remains unclear when the bill will hit the Senate floor. Last I heard, Senate leadership still hadn't scheduled it. But there's a long session after Easter recess, and it could get a two-week chunk of that time. If it doesn't, then the Senate will probably consider it by July.