Republicans Cave on Financial Reform, Debate to Begin

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I was just about to hit send on a post about how the Dems were rolling out cots for a forced all night session on financial regulatory reform when I got this email from Senate Minority Leader Mitch McConnell:

“I appreciate the efforts of Sen. Shelby to work toward a bipartisan solution on an issue that will have an impact on nearly every American. The time afforded by my Republican colleagues and Sen. Ben Nelson was instrumental in gaining assurances from the Chairman that changes will be made to end taxpayer bailouts and the dangerous notion that certain financial institutions are too big to fail.

“Unfortunately, Sen. Shelby believes that continued talks on a number of provisions affecting Main Street will not bring the negotiators any closer to an agreement. Now that those bipartisan negotiations have ended, it is my hope that the majority’s avowed interest in improving this legislation on the Senate floor is genuine and the partisan gamesmanship is over.  I remain deeply troubled by a number of provisions in this bill and will work aggressively in the days ahead to ensure that the majority does not use our mutual interest in regulating Wall Street to extend the federal government’s unwanted hand into Main Street.”

What does this mean? It means that the GOP will finally allow debate to begin on a bill overhauling the rules that govern Wall Street. Senate Majority Leader Harry Reid’s office also confirmed that a deal has been reached to proceed. So, no all-nighter, although word is the Senate will still be in until midnight or so. Republicans had been concerned with some of the “too big to fail” provisions, essentially that by deeming some megabanks too big to fail they’d be tacitly implying that the government would step in to prevent such banks from failing. That, in the Republican mind, is dangerous as it might encourage riskier behavior at these banks because of a perceived safety net and would give megabanks an advantage over smaller banks. No details were, obviously, available in the statement on what a compromise might entail, though it seems likely that the changes will be made through amendments to the bill on the floor in the coming week.

At the same time, several issues remain outstanding, as McConnell notes. Those talks have broken down and will likely have to be hashed out on the floor, if they can be. The Republican conference will be meeting at 4:30pm today to discuss how best to proceed. A release from Alabama’s Richard Shelby, the top Republican on the Banking Committee, on the remaining issues:

“This bill still contains a sprawling new consumer protection bureau that will find and force its way into facets of our economy that had nothing to do with the housing crisis.  This massive new bureaucracy would have unchecked authority to regulate whatever it wants, whenever it wants, however it wants.  I am aware of no other arm of the federal government this powerful, yet so unaccountable.  In my negotiations with Chairman Dodd, I have consistently supported strengthening consumer protections.  I have also advocated for a sensible and meaningful role for safety and soundness regulators in this new agency’s operations.  Unfortunately, despite my demonstrated willingness to propose compromise solutions, this sensible step has proved to be a bridge too far.

“Also included in this legislation are critical provisions relating to derivatives.  These provisions, which Democrats developed on their own behind closed doors, were only very recently inserted into the bill.  In fact, I was not provided the opportunity to share my views on a single aspect of the derivatives provision.  While I firmly believe we must end the casino-like atmosphere on Wall Street, I also believe we must protect Main Street’s ability to create jobs and grow the economy.  In my judgment, the provisions as currently drafted would have far-reaching and devastating effects on these businesses and our economy, increasing the cost of nearly every product we use and negatively impacting job growth.