A few days ago, we checked in on negotiations over the Volcker rule, which would force federally insured banks to stop speculating with their own money and running hedge and private-equity funds. Democrats have been negotiating with Massachusetts Republican Sen. Scott Brown over weakening the rule so he would vote for the final financial-reform bill, but a better course would be strengthening the bill to lure over Sen. Russ Feingold or Sen. Maria Cantwell, two Democrats who voted against the Senate version of the legislation because it wasn't strong enough.
Now it seems that there is some sneakiness afoot, with Democrats hinting they are negotiating with Feingold and Cantwell in order to force Brown to make a deal quickly. But Senate sources say negotiations with the two Democrats have been tepid at best, suggesting that more outreach is needed for these votes. For Cantwell's part, it's unclear changes would need to be made to get her on the bill; while her goal of restoring the complete separation between commercial and investment banks seems out of reach, it's possible that adopting her ideas to close loopholes in derivatives regulation and strengthening the Volcker rule could be enough. "It would go without saying that she wouldn't vote for a bill that was weaker than the one she voted against," notes one Senate aide familiar with the discussions.
Feingold, on the other hand, is a little more transparent, with his staff releasing a statement yesterday that included a list of provisions the Wisconsin senator would like to see in the bill. "I have spoken to Senate leaders, the Obama administration, and members of the conference committee and made my concerns well known," Feingold said in the statement. "I opposed deregulating Wall Street and eliminating the protections of the Glass-Steagall Act, a position which put me at odds with many in Washington who supported the very policies that contributed to the financial crisis, and who now support these bills that simply don't get the job done." Here's his wish list:
- Cantwell-McCain-Feingold amendment to restore the Glass-Steagall firewall between Wall Street and Main Street
- Sen. Dorgan's “too big to fail” amendment, which requires that no financial entity be permitted to become so large that its failure threatens the financial stability of the U.S.
- Brown-Kaufman amendment proposing strict limits on the size of financial institutions
- Dorgan amendment to ban so-called naked credit-default swaps, speculative bets that played a role in the economic crisis
- Merkley-Levin amendment to prohibit any bank with government insured deposits from engaging in high-risk finance, like investing in hedge funds or private-equity funds
Unfortunately, it doesn't look like the first four items will make it into the bill, but the Merkley-Levin amendment will likely be the basis for the Volcker rule during conference negotiations. The question now for these legislators is how long to stick to their guns and fight for provisions that lack a major consensus in order to shepherd some of the more feasible reforms into the bill -- unless they decide, as Feingold certainly could, to simply hold his ground and vote no in protest.
Still, there is some hope. "There were folks on the conference committee who feel as we do and are working hard to strengthen it; we feel that the signs are that things are kind of moving in the right direction," the Senate aide said.
-- Tim Fernholz
