With the GOP ending their obstruction for the time being, the financial-reform bill is moving to the floor for what looks to be a busy amendments process. Here are five trends to watch:
- Dodd's Dealing. Senate Banking Committee Chair Chris Dodd is still hunting for a deal that brings Republicans on board. That means he'll be open to negotiating key Republican hang-ups with the bill, including the advance fee charged to banks for liquidation costs, which will likely be dropped without too much adverse effect on the legislation, or more worryingly, around the scope and powers of the consumer-protection authorities in the bill. Dodd may also discourage more radical amendments if he thinks they'll drive moderate Dems from the bill or hurt his attempts to get Republican votes.
- Bad Amendments Republicans [and some Democrats]* will bring up amendments that will likely include exemptions for specific industries -- auto dealers, payday lenders -- from consumer protection rules, federal preemption of state regulators, new loopholes in derivatives regulation, weaker prudential standards, and even radical redesigns of parts of the bill. While it won't be easy for Republicans to pass amendments in the face of a united Democratic caucus, playing to regional interests could result in a few successful poison pills. Republicans may even offer new language on Fannie Mae and Freddie Mac, an issue Democrats are reluctant to talk about -- they want to deal with it separately from the current legislation.
- Good Amendments. Readers know about Sen. Jack Reed's plan to propose a truly independent consumer financial protection agency, and Sens. Kaufman and Brown's plan to strictly limit bank size and risk; both have real momentum behind them but could come under fire from leadership, (as with health care's public option) if they disturb agreements with moderate Democrats or potential Republican votes. Expect other progressive amendments on derivatives, executive compensation, and perhaps even re-instituting Glass-Steagall or a stronger Volcker rule.
- Nelson's Needs. Once again, Democratic Sen. Ben Nelson joined in the Republican filibuster. He's publicly complaining about nonexistent consumer financial protection provisions (no, it won't affect dentists or orthodontists, nor is there any strong evidence it will increase the cost of credit), but top constituent Warren Buffet's opposition to derivatives reform seems to be driving the irascible Nebraskan's opposition. Nelson will likely have to be bought off, as always, but Dodd and other Democrats have shown remarkable integrity in preserving the key derivatives rules Nelson opposes. Nonetheless, finding a way to get him on the bill will be key to moving forward.
- Filibusters Ahead? The Republicans still have many opportunities to filibuster this bill before it can pass the Senate -- and even afterward, there will be another vote on a conference report prepared between the House and the Senate's differing versions. While yesterday's victory shows the political advantage that Democrats have on this issue, going forward they're going to need the same clarity of purpose in order to surmount a series of challenging obstacles to pass a strong bill. Worry, though, if a deal with the GOP gets brokered: That likely means something in the bill has been weakened beyond use.
The best-policy scenario is a bill that passes with a handful of GOP votes, and that's going to require some audacity and leadership from Dodd and the rest of the Democrats -- not to mention more visible action by President Obama, who's set to play a larger role in the effort going forward.
*Matt Yglesias rightly points out that Dems will try to strategically weaken the bill, too.
-- Tim Fernholz
(AP Photo/Charles Dharapak)