Why Dodd's Choice to Remain Senate Banking Chair Matters

When Ted Kennedy passed away, it opened the chairmanship of the Health, Education, Labor and Pensions Committee in the Senate. Some insiders expected Sen. Chris Dodd to bolt from his perch at Senate Banking to take over for his friend. That might have been good for Dodd, who faces a tough re-election after months of PR clobberings, but it would have spelled doom for financial reform. Dodd's successor might have been South Dakota Sen. Tim Johnson, whose relationship with banks, especially Citigroup, is fairly intimate.

But good news for financial reformers. Sen. Chris Dodd is staying! Good luck with your potentially doomed re-regulation and re-reelection plans, Sen. Chris Dodd!

Here's Reuters with the news:

By staying at banking, Dodd will prevent potential further delays in an already bogged-down push by Democrats to tighten regulation of banks and capital markets in response to the 2008-2009 financial crisis, the worst in decades.

2010 is going to be a big, challenging year for Dodd. The difficulties of bank re-regulation shouldn't be overlooked. And Dodd's reelection campaign appears to be in serious trouble. But rather than seeing these challenges as the equivalent of sharpening a sword with one hand while untying a Gordian knot with the other, maybe Dodd sees 2010 as a chance to sharpen his sword by slicing the knot in half. To unpack that totally superfluous metaphor: Solving financial regulation could be precisely the thing that would make Dodd a populist hero, which in turn would boost his November chances.

Update: Bossman Bob Cohn says I nudged the logic train off its tracks a bit with this post. Sorry if the line of thought was confusing. So I'll tell you exactly what I distilled for him in an email:

1) Financial reform is going to be tough and Johnson's chairmanship would have killed it.
2) Financial reform is going to be tough still...
3) ...but if Dodd passes it, he could revive his reelection chances at the same time by riding a populist wave toward November.

I apologize for any confusion and promise to use future Greek allusions sparingly.