Did President Obama really need for Congress to rush to finalize the financial regulation bill prior to the G-20 meeting held over the weekend? That was the reason given for the urgency to get the bill done, culminating in a nearly 20-hour conference committee session ending at 5:39am Friday morning. But if you've read anything about the weekend's meeting in Toronto, then you've probably discovered precious little concrete action was taken on financial regulation. Maybe the casual chain was reversed. Maybe the bill's fate depended upon getting it done before the G-20 meeting.
The only mention of the U.S. bill in the G-20 declaration (.pdf) was the following:
We welcome the strong financial regulatory reform bill in the United States.
It then goes on to paint in very broad strokes about the regulations the group intends to adopt. Sure, the nations all agree that systemically risky firms need to be looked at. They agree on more derivatives clearing. They think capital requirements should be higher. The list goes on, but none of it is specific. Indeed, all such general priorities could have been easily agreed-upon even without the specific details of a U.S. bill available. There was no mention that the U.S.'s bill would serve as a roadmap for the other nations' reform effort.
Surely, the President's advisors had some idea that this would happen. After all, many of the countries, particularly those in Europe, are in no position to shock their financial markets with tough new regulations right now. Those nations are still treading water in the wake of nasty sovereign debt problems. While they may legitimately intend to develop financial reforms eventually, they certainly won't signal any specifics at this time and threaten their economies' stability.
The urgency was blamed on the need to finalize the bill so the G-20 could learn from the U.S. But perhaps if the U.S. learned that the G-20 had no intention of enacting any financial reforms in the near future, the fate of bill itself would have been in danger.
Without the aggressive timeline set back in April by Senate Banking Committee Chairman Chris Dodd (D-CT), the regulatory effort could still be stalled in his chamber. It may not even have reached conference committee yet, much the less been pushed through in two weeks. Now add the political shock of the G-20 saying that the global economy isn't ready for broad financial regulation yet. Republicans would become even more vocal that now isn't the time to be taking on Wall Street, saying we should wait for international coordination. Moderate Democrats may also be more nervous that the timing isn't right. The bill might not have been passed this year, or it would have been even more watered-down.
Perhaps this is just a cynical view, but you have to wonder what purpose the Obama administration believed walking into the G-20 summit with sort-of-finalized regulatory changes really served. As we now know, despite conference being completed the bill could still change further. A key Republican "yea" vote in the Senate, from Scott Brown, might be in jeopardy due to the bank tax. Sen. Byrd's death further complicates matters. If the bill had passed a month or two later, couldn't the Treasury Secretary have made a handful of trips to talk with foreign finance ministers and explain the reforms without a formal G-20 meeting? Or couldn't the President have waited until the Seoul G-20 summit in November to put truly finalized U.S. reforms on display?
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