Senate Democrats Lose Reform Vote, but Smell Victory
Senate Democrats got exactly what they wanted Monday night: a concrete way to try to tar Republicans as beholden to Wall Street schemers who would put the country in danger of another financial industry collapse.
By a vote of 57-41 Monday night, Republicans stuck together and effectively blocked a sweeping financial reform bill from coming to the Senate floor. Sen. Ben Nelson (D-Neb.) voted with Republicans, and Majority Leader Harry Reid (D-Nev.) changed his vote in order to set up a revote, possibly Tuesday. Sixty votes were needed to avoid a filibuster.
Despite their one defection, Democrats seemed to be thinking about all the campaign ads they could run in November against Republicans, and they appeared unconcerned about whether a bipartisan financial regulatory reform measure will ever materialize. Meanwhile, Republicans continued to say they want to support financial reform and believe a compromise is still possible.
At press time, Democrats were hatching plans to vote on the measure again Tuesday and possibly Wednesday and Thursday as well. Additionally, freshman Democrats who have been itching for a good floor fight were pushing leadership to keep the Senate in session all night tonight if Republicans continue to prevent the measure from coming to the floor.
Reid said Monday that bipartisan negotiations would continue regardless of Monday’s vote, but he told a reporter that any deal would have to be done by amendment on the floor anyway, so he was nonplussed about why the GOP was preventing him from bringing the bill up for debate.
It was unclear whether the Democrats’ hardball tactics would adversely affect bipartisan negotiations, and Democrats appeared to be hoping that their drumbeat of votes and rhetorical jabs would force GOP opponents into submission — with or without a compromise.
“Actions have consequences, and there’s a political price to be paid to protect Wall Street,” one senior Senate Democratic aide said. “We feel we have the upper hand. We’re on the right side of the issues.”
One senior GOP aide dismissed the Democratic strategy as “a game of pretend,” saying, “Republicans understand that this bill has grown-up consequences and are therefore likely to concentrate on the actual negotiations.”
One potential swing vote, Sen. Scott Brown (R-Mass.), said he voted to filibuster “because I want to encourage them to continue to work together and come out with a truly bipartisan bill that takes into consideration everybody’s concerns.”
Brown added that Democrats who portray Republicans as against reform are “trying to score political points instead of just doing the people’s business.”
But a deal remained elusive Monday. Senate Banking, Housing, and Urban Affairs ranking member Richard Shelby (R-Ala.) said that negotiations with Chairman Chris Dodd (D-Conn.) had reached “a tipping point.”
“The next two or three days are very important,” Shelby told reporters after a meeting with GOP leaders. But Shelby also held out the possibility that Republicans would introduce their own “alternative” reform bill to contradict Democrats’ contention that Republicans did not have their own proposals to rein in the Wall Street excesses that nearly led to a collapse of the financial industry in the fall of 2008.
“We will have an alternative,” Shelby said. “What we’d rather have than an alternative is a good bipartisan bill.”
Meanwhile, many Republicans were scratching their heads Monday about Dodd’s deal with Senate Agriculture, Nutrition and Forestry Chairman Blanche Lincoln (D-Ark.) to adopt her bill’s stringent rules for derivatives. Derivatives are complex financial instruments in which investors can bet on the future prices of commodities and other financial products. Mortgage-based derivatives were blamed in part for the near-collapse of the banking industry in the fall of 2008.
Dodd and White House officials had initially resisted adding Lincoln’s bill to the larger Banking measure because they felt it went too far, but a groundswell of support in the Senate Democratic Caucus led Dodd to accept a controversial provision that would essentially force banks to spin off the portions of their businesses that sell derivatives.
The Lincoln plan is backed by a few Republicans, including Sens. Chuck Grassley (Iowa) and Olympia Snowe (Maine), but is opposed by other potential players such as Sen. Bob Corker (R-Tenn.). Shelby said he had not seen the agreed-upon language yet.
Though she largely supports the language, Snowe expressed frustration Monday that Democrats scrambled over the weekend to address the issue but didn’t solve other major problems with the bill.
“I applauded that effort — I support it — but why not these other issues?” she said.
Snowe said she had problems with a $50 billion bank-financed fund to close up troubled firms as well as with the effects of the measure on small businesses and community banks. She added that Monday’s cloture vote was premature since bipartisan talks were ongoing.
Sen. Mike Crapo (R-Idaho), who sits on the Banking panel, said he believes the deal with Lincoln could imperil the broader bill’s chances for broad bipartisan support.
“I think that it will cause some significant trouble,” he said Monday. “While we do need some significant reforms, I am concerned that the movement in the bill continues to be to the left.”
The lone Democrat to vote for the filibuster said he was concerned that the bill would adversely affect small businesses and meddle with the lending process of nonbank institutions such as auto dealers.
“I want to make sure this deals with Wall Street and not Main Street,” Nelson said.
But some Democrats suggested that Nelson was opening himself up to more accusations that he was withholding his vote to secure special deals for his state.
During Agriculture Committee consideration of the derivatives portion, Nelson had pushed an exemption to collateral requirements for some companies. That exemption has also been advocated by Nebraska billionaire Warren Buffett, whose company Berkshire Hathaway has billions invested in derivatives.
The Nelson provision was dropped from the bill during the Dodd-Lincoln negotiations this past weekend, sources said. Nelson came under fire during the health care debate for securing the “Cornhusker Kickback” in the Senate-passed bill, which would have ensured the federal government would pick up the tab for the state’s Medicaid expenses.
David M. Drucker contributed to this report.