The financial regulation battle wears on. Although the House passed the bill Wednesday by a surprisingly comfortable margin of 19 votes, the Senate couldn't fit a vote in their calendar before their Independence Day recess. It's not entirely clear whether a last-minute change to how the regulation will be paid for was enough to satisfy several centrist Republicans, including Senators Brown (R-MA), Grassley (R-IA), Collins (R-ME) and Snowe (R-ME), who voted for the measure initially. But even if it is, this additional time could still put the legislation in jeopardy.
If the other Republicans convince these few defectors to unite with them against the measure, then the bill will be in trouble. Democrats need at least one Republican vote to prevent filibuster. They may need a few, since two of their own voted against it originally, and Senator Byrd's death leaves an empty seat for the time being. Here are five potential obstacles that might bother these key Republicans.
As explained here, the conference committee left the bill with some problematic language that could cost Main Street firms up to $1 trillion. The Senate bill intended to exempt such "end users" from margin requirements associated with using derivatives for hedging their non-financial businesses, but the language got changed by the House when the bill was revised last week.
This issue was brought up when the conference committee briefly reconvened on Tuesday, but an amendment to change it back failed on the Senate side, with the vote tied six-to-six. It's a bipartisan issue, however. One of those 'yea' votes included the aggressive derivatives section's author Agriculture Committee Chairwoman Lincoln (D-AR). She and Chairman Dodd (D-CT) sent a letter (.pdf) yesterday to Chairmen Frank (D-MA) and Peterson (D-MN) of the House yesterday to explain their concern. This is a serious problem, and centrist Republicans could be convinced to demand that the language get fixed before the bill passes.
Initially, it seemed like these few Republicans were angered that the bill would require $19 billion in new taxes. Now, it looks more like they just cared about who was being taxed -- very large banks and hedge funds. But if their fiscally responsible consciences start to get to them, they could decide that other spending should be cut, or some of the bill's expenses scaled down before the new regulation earns their votes.
Of course, once their constituents get wind of the fact that these centrist Republicans would prefer they pay for the new regulation instead of giant banks and hedge funds, those taxpayers may be displeased. Since the regulation will be paid for mostly by preventing bank bailout money from paying down the deficit, several billion dollars of spending will fall directly on the shoulders of the American taxpayer. The rest will also ultimately be paid by consumers, since the larger universe of banks that will face higher FDIC assessments will just pass those fees on to their customers.
Debit Interchange Caps
The credit unions have been vocal opponents of a provision in the bill that would put price controls on debit interchange fees. They argue that the measure will hurt them and their customers. The National Association of Federal Credit Unions has already expressed its intention to try to fight this provision in the Senate, given the new timetable.
Other Contentious Provisions
Then, of course, there are those provisions that have been controversial from the start. These include the Volcker Rule and the derivatives spin-off requirement for banks. Both of these measures were watered down significantly in the final bill, but they're still a concern to most Republicans. If more tangible evidence on the harm they could cause to the financial markets is presented, then those fringe Republicans could start to worry about these provisions as well.
In all likelihood, these Republicans won't be swayed by these potential obstacles. They voted for the Senate's original bill, which was more aggressive than the compromise produced through conference. Yet when the political winds pick up, lawmakers sometimes sway.
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