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Senate Nears a Showdown on Financial Reform

Democratic and Republican Senators are bracing for a legislative battle royal over financial regulatory reform, but both sides are clearly hoping a bipartisan agreement breaks before they have to draw their rhetorical swords.

GOP Senators appeared to be closing ranks in an attempt to get Majority Leader Harry Reid (D-Nev.) to agree to some key changes. But they were also hoping to avoid a filibuster showdown with Democrats, given a bipartisan deal between Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) could be in the offing — perhaps by the end of the week.

Democrats were struggling to mend an intraparty rift over the issue: Some Senators are itching for a floor fight now while others are urging leadership to hold off until a bipartisan bill is ready.

“I think there’s a continuing tension in the caucus between those who hold out hope for meaningful and sincere bipartisan negotiations and those who see Lucy yanking the football away from Charlie Brown for the umpteenth time,” Sen. Sheldon Whitehouse (D-R.I.) said.

Minority Leader Mitch McConnell (R-Ky.) has tempered his criticism of Dodd’s financial reform bill in recent days and repeatedly asked for more time to work out a deal. Meanwhile, Republicans have picked up their criticism of the White House for interfering with substantive talks that could have produced a compromise were it not for ads from the Democratic National Committee politicizing the issue.

“Why do you think there isn’t an agreement?” Sen. Richard Burr (R-N.C.) asked. “The White House has to decide whether they want an issue in November or whether they want a consensus bill.”

A GOP aide echoed that sentiment, noting that Treasury Secretary Timothy Geithner continues to meet with Senators to discuss potential changes to the overhaul “but nothing is happening.”

“I don’t know if he’s not telling them anything or if the White House political arm just doesn’t care,” the aide said.

As Republicans continued hammering that message, White House Deputy Press Secretary Bill Burton told reporters Tuesday, “We’re going to be able to have a bill that has some bipartisan support.”

Burton also said White House officials were considering stripping language creating a bank-financed $50 billion fund for the dissolution of failed financial firms in order to score GOP votes.

“I think there’s a lot of different calculus for what it will take to get some Republican support onto this bill, but like I said, that’s just one of many issues that we’re talking to them about,” Burton told reporters.

Still, neither Democrats nor the White House seem eager to slow down the process of considering financial reform, and Reid is likely to start debate on the bill as early as Monday.

Dodd told his colleagues on Tuesday that he believes he could seal a deal with Shelby by the end of the week, but many Democrats — some sources said roughly half the Conference — are leery, believing Dodd will give too much ground to Republicans.

One senior Senate Democratic aide said Democrats might rally around Dodd if he jettisoned the controversial bank fund, so long as he does not compromise too much on consumer issues and the derivative title.

“If he weakens it too much, there could be a rebellion,” the aide said. “There’s a hope that Dodd realizes how much leverage he has” with Republicans.

Republicans have attacked the inclusion of the $50 billion fund as a pathway to permanent taxpayer bailouts. At their weekly luncheon Tuesday, Democrats discussed whether to eliminate the fund, but some feared they would be playing into Republican hands by validating their argument. Others suggested that getting rid of the fund would give Republicans “nothing to hang their hat on,” the senior Democratic aide said.

Either way, Democrats are not wed to keeping the fund in the bill for the duration of the debate. After all, the White House opposes it as well.

“We’re less concerned about whether there should be a $50 billion fund or another fund or another option,” Sen. Debbie Stabenow (D-Mich.) said. “We’re concerned that there be no taxpayer-funded bailouts.”

Still, Stabenow said Democrats “are not going to weaken this bill to get Republican support.”

Sen. Jeff Merkley (D-Ore.), a Banking panel member, indicated that he does not necessarily need it to be in the bill, but he was dubious of the GOP’s willingness to make a deal that, in his opinion, would insulate taxpayers from future bailouts in the same way the $50 billion fund would.

“There’s a variety of ways to accomplish that objective,” Merkley said. “We hope to work with Republicans who actually care about protecting the taxpayers to find the best way to do it.”

Republicans heard from about 10 of their colleagues during their weekly caucus Tuesday, including Shelby and Sen. Bob Corker (R-Tenn.). The overall message, according to aides familiar with the discussion, was that GOP Senators “are right on the policy” and that the Democratic message that they are sympathetic to Wall Street could easily be debunked by pointing out that Reid, Obama and other prominent Democrats have accepted campaign contributions from the financial sector.

Sen. George LeMieux (R-Fla.), who was scheduled to meet Tuesday with Dodd and Shelby on the issue, said he was against the bill in its current form but would likely be a “yes” vote if changes were made.

“I am a Republican who wants to vote for regulatory reform, but we’ve got to do it on a bipartisan basis,” he said.

Though Corker presented a scathing critique of the Dodd bill to his colleagues Tuesday, he struck a far different tone with reporters, criticizing both parties for ratcheting up their rhetoric on the issue.

“The way this whole debate has been framed is to me very low level and very silly,” Corker told reporters. “And even the things that we’ve been saying on our side of the aisle about bailouts and all that, they miss the point and I think take us off on a bunch of rabbit trails.”

Corker also questioned his leadership’s strategy of seizing on the $50 billion fund as the boogeyman in the bill, saying that should Democratic leaders eliminate that fund, Republicans would have little political cover if Democrats forced a vote.

“You know the interesting thing about us picking ... the $50 billion fund is that it plays right into the hands of the administration, because they don’t want this $50 billion fund,” Corker said. “What they want to do is come right back around and tax the banks, and if there’s a $50 billion pre-fund, it keeps them from being able to do it. So I don’t understand why our line of attack has been over that fund.”

Corker said he is content to stick with his fellow Republicans against the bill as long as he feels both sides continue working toward a bipartisan deal that he can fully support.

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