Senate Committee Nears Deal On Financial Reform Bill
The Senate Banking Committee Wednesday appeared closer than ever to an agreement on a bipartisan bill covering sweeping reform of the financial sector, with one key negotiator saying Republicans and Democrats were getting "more comfortable" with the proposals under discussion.
"We’re really close," said Sen. Bob Corker (R-Tenn.). "We’ve had a really good day. We’re getting to a place where Democrats and Republicans both can get comfortable with this. March 3rd has been the best day yet in the process."
Corker's offered that analysis after coming off the Senate floor late Wednesday afternoon, saying that he had "great" meetings on the issue with fellow Republicans as well as the Democratic committee chairman Chris Dodd of Connecticut, with whom Corker has been working closely over the past three weeks.
Though Corker said he "had nothing new to report", presumably referring to the actual proposals, sources told CNBC.com that Corker and other GOP senators, including the party's ranking committee member, Richard Shelby of Alabama, had proposed to Dodd a revised outline for a new consumer financial protection agency, an element of the multi-part reform package that has deeply divided the two parties since work on a draft bill began in earnest late last year.
Sources say committee members Sens. Judd Gregg of New Hampshire and Mike Crapo of Idaho are also behind the latest proposal, which appears to water down a Corker proposal from earlier in the week that would place the watchdog agency within the Federal Reserve and the head of that agency report to the Fed chairman. The central bank already has some consumer protection functions.
Under that plan, the agency would have rule-making power, but not the examination and enforcement powers of a recent Dodd proposal, which Corker and Shelby rejected last week.
Dodd was said to have responded to the latest GOP proposal Wednesday with a counter offer, the nature of which is unknown.
Dodd spokeswoman Kirstin Brost would only say that, "Chairman Dodd will judge proposals based on whether or not they provide the consumer protection watchdog with sufficient independence and authority to protect consumers."
Corker's office referred to the senator's earlier comments, while the offices of the other senators involved could not be reached for comment.
The latest Republican proposal follows an all Republican meeting with Senate Minority Leader Mitch McConnell Tuesday night, according to one source.
The escalating negotiations, after weeks of talks--including last weekend--suggest the two parties are finally closing in on a compromise agreement, which Corker's comments seemed to imply.
"Everyone is constructively involved and working toward getting a good bill at this point," said Corker.
Bipartisan talks between Corker and Dodd have taken place on almost a daily basis in recent weeks, with both sides stressing that some differences at this stage are solely in the language of the bill.
Since his first draft was deemed dead on arrival last November, Dodd has been working closely with Republicans, first with Shelby and more recently Corker—after Shelby and Dodd reached an impasse in early February.
Shelby, however, went to work on his own version of a bill, which was said to be a serious substitute.
"Shelby is engaged and while he may not be sitting down directly at the table, he is in the background in a very, very constructive way," said Corker. "As I’ve said all along, to get Shelby on board is a big deal. You end up with an 80 vote bill, and that’s strong."
Democratic committee members Mark Warner of Virginia and Jack Reed of Rhode Island have also been been involved in regular negotiations, although they have focused on other subjects such as resolution authority, a system risk council and over-the-counter derivatives. There has been general agreement in those areas.
The CFPA has been a divisive issue from the start.
Senate Democrats have pushed for a powerful new agency with rule-making, examination and enforcement powers and a director appointed by the president, which is what the House approved in its reform package late last year and is close to what the White House first proposed.
The GOP is concerned that such a structure could potentially clash with existing agencies, creating safety and soundness issues for the financial system. Republicans would also like to see fewer powers and keep the consumer agency out of the Treasury Department to avoid politicizing it..
Dodd's most recent proposal did just that. Corker countered with the Fed. Shelby originally preferred the FDIC, but has since become flexible on the subject, saying it was more a matter of authority than location. Reed would have the agency completely independent and said he will offer an amendment to that effect..
Other senators--both Democratic and Republican--gave the Fed proposal a cold reception, reflecting current Congressional disfavor with the central bank.
As the banking committee negotiations heated up, other key players in the policy debate made their positions known.
Treasury Secretary Timothy Geithner told a group of labor and consumer leaders that the Obama administration will only accept a powerful CFPA with rule making and enforcement authority and sufficient independence, according to one source familiar with the meeting.
Meanwhile, Financial Services Committee Chairman Barney Frank (D-Mass.), who worked closely with the administration on the House version of the reform bill, said he was against putting the agency in the Fed, but could accept the Treasury under the right circumstances.
Though the CFPA issue has been a focal point, senate sources say an agreement on derivatives supervision has also been elusive; it may not be included in the draft legislation and would instead be handled as an amendment later on in the legislative process.
Financial reform—always among President Obama's top legislative priorities—has assumed even greater importance since health care reform stalled.