Could Chris Dodd Ally Democrats With The Tea Party Right?

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The sweeping new regulatory reforms proposed by Democratic Sen. Chris Dodd would impose a number of big changes on the way government regulates the economy, which the Wire covers here. What about the plan's political implications?

Dodd's proposals would curb the powers of the Federal Reserve, which is seen as a close ally of banks, and establish three new regulatory agencies, including the Consumer Financial Protection Agency. These provisions look pretty different from the regulatory reform designed by Democrats in the House, but their tough stance on regulation and the Fed might win populist favor on the left and the right. Could Dodd bring the Republican "Tea Party" grassroots and Democrats together?

  • Bipartisan Populist Alliance  Ezra Klein suggests financial regulation reveals that populism isn't partisan. "The Tea Parties have been, in large part, about how much everybody hates the banks. And what do the banks hate? Well, Dodd's plan," he writes. "The politics of this, in fact, look to be the reverse of the politics of health-care reform. [...] The Republican attack has been populist in nature. On this, you could see the liberal and conservative bases largely agreeing, while industry actors join in opposition. The battle lines might cut the establishment (the Federal Reserve, the banks, etc.) from the grass roots more than they separate the two parties."
  • But Populists Are Also Anti-Regulation  Matthew Yglesias doubts Tea Party populism will ever support regulation. "Maybe. But I kind of doubt it," he writes. "And the reality is that Tea Party populism is uninformed and completely incoherent. Tea Parties claim to believe they wish the government hadn’t rescued the banking system last fall, but I haven’t seen a single sign at a rally or a single quote from a rallier to suggest support for enhanced regulation. Glenn Beck isn’t calling for enhanced regulation. The Koch family isn’t going to start busing people to pro-regulation rallies."
  • Everyone Hates Banks  Ezra Klein sees anti-banker sentiment as uniting grassroots-oriented Republicans with Dodd. "Unlike health-care reform, where Republicans really don’t want a bill and will happily reject all manner of bids, there is reason to believe that both sides want some new financial rules in place. Republicans weren’t any happier than Democrats when the banks held them hostage last year. Joining with the banks to kill financial regulatory reform doesn’t look like a popular move. And the big banks really are pretty disliked on the Hill."
  • Not In The House  The American Prospect's Tim Fernholz thinks such a coalition would only work in the Senate. "If you've been following the debate in the House, you'll see complete opposition from Republicans, as well as the banks and the regulators -- the GOP literally wantto change nothing. The Senate has different politics that arguably make for a stronger bill -- the House Financial Services Committee is home to a lot of new Dems and freshmen who are there mainly for the fundraising, while the smaller Senate Banking Committee, though it has its moderates, has more willingness to make serious changes and more skeptical of the Fed -- but even in the upper chamber Republicans are still uncommitted to much of the broad regulatory reform agenda, and Chris Dodd's bill is harsher on regulators than the House version, so there could be more pushback from them."

This article is from the archive of our partner The Wire.