Battle Over Financial Reform Heats Up on Capitol Hill
With Senate Banking Committee Chairman Chris Dodd ready to introduce a revised package of reforms for the financial sector Monday followed by markup the following week, GOP committee members fired off a letter to the Connecticut Democrat balking at the time table.
The GOP is concerned that the "proposed timetable will not allow members sufficient time to fully understand the details of [the] legislative proposal," according to a copy of the letter obtained by CNBC.com.
The letter, dated March 12 and signed by all ten GOP members of the committee, "adds that a "markup scheduled in haste would certainly pevent us from achieving" the goal of passing bipartisan leigslation."
Dodd last week essentially sidelined bipartisan talks, saying there was "not a lot of time left" to move a complicated piece of legislation through Congress during an election year and "it was "time to move on." Sources, however, say those talks continued, in fact, right through the weekend.
The committee chairman had been negotiating with Republican panel member Bob Corker on a bipartisan bill for more than a month.
The offices of Dodd and Corker were unavailable for comment on the matter of the letter.
The GOP letter is the latest move in what seems to be a game of political chess since talks ended last week.
During a Thursday news conference, Dodd maintained that his decision was "not a reflection of something breaking down," and that it had already yielded "broad, bipartisan agreement."
That comment, however did not apear to entirely jibe with a news release earlier in the day, wherein Dodd appeared to signal that key differences over a couple of measures had prompted him to move ahead with his own bill.
In addition, Corker had already scheduled a news conference before Dodd's press release was eveb made public; what's more, some of Corker's comments appeared to contradict Dodd's.
Corker called Dodd's decision "very disappointing", adding the two sides seemed on the verge of an agreement over the most divisive of issues — the shape and power of a consumer watchdog for financial products.
"We were there," Corker said, describing any remaining differences as "miniscule."
Dodd, however, maintained, "we're not there yet."
Corker raised additional question about the process by saying, "there's no question the White House, politics and health care have kept us from getting to the goal line."
That may be, but Dodd has yet to acknowledge that publicly. He repeatedly said time was running out and he had previously warned that he was prepared to go it alone on legislation if necessary.
The time element along with a variety of political factors seem be at work.
Congressional sources say pressure was indeed growing on Dodd to act.
"The president was starting to push him a little bit," said one senior Congressional staffer.
Though it's not known if President Obama met with Dodd personally recently, as he did in January, Dodd did have a meeting with Treasury Secretary Timothy Geithner Tuesday, the day before talks ended.
The President has been an ardent proponent of a powerful, independent consumer watchdog from the start of the legislative process last spring and with the recent stumble of health-care reform legislation he has spent more time pushing for financial reform.
There is also concern among Democrats that the GOP's willingness to engage in extensive, rolling negotiations might in fact be a stalling tactic.
"Are you here to talk or run out the clock," said the source. "It was just going to continue to be talk and talk."
Finally, there is concern that Dodd had drifted too far from key party positions on some issues in trying to find common ground.
"Dodd should be moving a strong bill with a well-orchestrated campaign and message behind it, calling the Republican bluff," said another source, a senior Senate aide. "My understanding is that Dodd is moving forward with a bill that includes concessions. I thought you made concessions to gain someone's support. After four months of negotiations, Dodd has made concessions to get Republicans to consider it. I truly don't get it."
Sources say Dodd is also keenly aware that House Financial Services Committee Chairman Barney Frank, who shepherded a version of the reform bill through his chamber, is insisting on a thorough reconciliation process with an open-hearing, conference-committee format to blend the Senate and House versions of the bill. That had not happened since 2003.
Corker acknowledged that factor in his news conference. "The elephant in the room is reconciliation and trying to get a bill out of committee," he said.
Less than two weeks ago, Senate Minority Leader Mitch McConnell met with Corker and other GOP banking panel members, according to one source. The meeting, the source said, was meant to get the GOP senators on the same page.
With the letter to Dodd, they certainly appear to be now.
"It shows all the Republicans are together," said one analyst.
The letter also says that Dodd's bill "will contain several provisions which will address issues that have never been subject to the Committees review or examination."
That is entirely possible in a bill this large and complicated—the House version was 1400-plus pages—but hardly unusual. Furthermore, Dodd said his draft would reflect much of what had been discussed and negotiated with Corker.
In terms of specifics, Dodd has only said the bill would have four major parts: End the concept of too-big-to-fail financial insitutions; address systenic risk by creating an early warning system; deal with over-the-counter derivatives; and, make a provision consumer protection, "including the possibility of a strong agency."
The last two issues have certainly been the most divisive.
Democrats want a powerful, independent agency with a presidential appointee, as well as rule-making, administrative and enforcement authority.
The GOP wants an agency with far less authority, saying its goals and actions could clash with other regulators and potentially threaten the safety and soundness of the financial system.
Derivatives supervision, which the Obama administration considers critical to reducing systemic risk, has been bogged down in talk about an exemption for so-called end users, private firms who use the products as a hedge, rather than the need to create a central clearinghouse for the market.
For all of his negotiating with Republicans, it is still unclear how much support Dodd has from Senate Democrats. His original draft bill in November met opposition from both sides of the political aisle.
Sen. Jack Reed of Rhode Island, for instance, has said he plans to introduce an amendment calling for an independent agency with a presidential appointee as director.
More than a few other senators support that.
Senators Jeff Merkley of Oregon, Sherrod Brown of Ohio, Ted Kaufman of Delaware and Maria Cantwell of Washington have all expressed serious reservations about parts of what's expected to be in the forthcoming bill.
"Some members of the Senate are saying, 'We want a bill with some teeth in it.'" said the source.
For example, in a recent floor speech, Kaufman said: "After a crisis of this magnitude, it amazes me that some of our reform proposals effectively maintain the status quo in so many critical areas, whether it is allowing multi-trillion-dollar financial conglomerates that house traditional banking and speculative activities to continue to exist and pose threats to our financial system, permitting banks to continue to determine their own capital standards, or allowing a significant portion of the derivatives market to remain opaque and lightly regulated.”
The heated debate in Congress have been matched by lobbying from both consumer and busines groups.
"The bill must balance the goals of strengthening the regulatory framework and protect consumers, without stifling the competitive marketplace," said Scott Talbott, SVP of government affaitrs for the Financial Services Roundtable, a top industry trade group.
A fight at the Senate level followed by another one over a conference bill with the House could take months and keep financial-reform legislation up in the air around the time of the midterm elections.
That and the battle over health care may be more than anyone can handle.
On the other hand, Dodd, who is not running for re-election this fall, is said to be looking to create a legacy legislation.
In either case, time is running out.