Senate Deal on Financial Reform Possible In Days: Dodd
Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he was hopeful a bipartisan agreement on a sweeping package of financial regulatory reforms could be reached in the coming days, but admitted there were still key differences between his party and the GOP.
"We don't have an agreement yet," Dodd told CNBC.com. "But I feel very optimistic that we will."
Dodd confirmed that the two sides remained divided over the thorny issue of a new consumer watchdog for financial products, despite a flurry of proposals and counter proposals in the past week.
"We're going to have a very independent consumer agency with a lot of authority and that's critical," said Dodd, who ticked through a list of conditions he deems critical to the new entity: a presidentially-appointed director, who is approved by the Senate; an independent budget; rule-writing authority;" and involvement in "the administration of those regulations."
The last point involves a key difference; Democrats want the agency to have enforcement powers, while Republicans do not.
When asked if a deal was a matter of weeks or days, Dodd said days, but was hardly committal.
Dodd met with fellow Democrat members of the committee to discuss the issues Thursday evening, but it's unclear if any decisions were made, according to a source. They also met with Sen. Bob Corker (R-Tenn.), with whom Dodd has been negotiating for weeks, the source said.
Dodd Thursday issued a statement making it clear that the two sides "haven't settled on the Fed as the place for this to be housed." He was referring to the GOP proposal this week that would make the agency part of the Federal Reserve, while giving it some measure of rule-making power.
Dodd also made clear his preference for a powerful, independent agency, putting him in sync with the position of the White House and House Financial Services Chairman Barney Frank (D-Mass.) in emphasizing that the agency's powers had to have teeth in them.
On Wednesday evening, Corker summed up that day's talks as "the best day yet in the process," leading to some to speculate that a deal was imminent after three-plus months of talks.
"We’re really close," Corker said after emerging from the Senate floor. "We’re getting to a place where Democrats and Republicans both can get comfortable with this."
Earlier in the day, sources say, Corker and other GOP senators, including the party's ranking committee member, Richard Shelby of Alabama, pitched Dodd what appeared to be a watered-down version of a Corker proposal from earlier in the week that would place the watchdog agency within the Federal Reserve and have the head of the 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.
Sources say committee members Sens. Judd Gregg of New Hampshire and Mike Crapo of Idaho were also behind the latest proposal. It appears to come out of an all-Republican meeting with Senate Minority Leader Mitch McConnell Tuesday night, according to one source.
Dodd was said to have responded to the latest GOP proposal Wednesday with a counter offer, the nature of which is unknown; his comments today, however, indicate his current thinking is similar to what was contained in his proposal to Republicans a week ago.
Dodd's statement Thursday echoed those of Treasury Secretary Timothy Geithner and Rep. Frank Wednesday.
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, Frank, 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.
Dodd's most recent proposal did just that, creating a Bureau of Financial Protection with rule-making, examination and enforcement authority.
Congressional Democrats have been generally supportive of such a powerful and independent new agency with 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, however, has resisted, saying 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 to avoid politicizing it.
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, 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.
Though the CFPA issue has been a high-profile, 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.