Financial reform: On the surface, US financial reform appears blessed with new momentum. Democrat Chris Dodd, chairman of the Senate Banking Committee, has found a new negotiating partner in Bob Corker, an eager freshman Republican. But the disruptive pairing creates as many problems as it appears to solve.
The effort to fashion a new financial regulatory structure clearly was stalled. Dodd was at an impasse with Richard Shelby, the committee's ranking minority member. If the two powerful veteran lawmakers had reached agreement, the Senate version could have been rammed through the House and won easy final passage in the full Congress.
But Dodd’s hard push, at the behest of the Obama administration, for a new Consumer Financial Protection Agency was a non-starter with Shelby.
Democrats also were starting to suspect that Republican leaders wanted the bill to collapse, as with healthcare reform.
Despite the alignment of congressional personalities, huge obstacles remain. Corker is likely to be almost as disdainful as Shelby of the CFPA, particularly as a stand-alone agency with strong enforcement powers. Republicans think the agency would relentlessly grow into a regulatory leviathan. The party leaders also seem to have the political muscle to flex if they want to deny the Democrats a legislative victory.
Even if a Dodd-Corker proposal actually were to advance to the full Senate, more problems await. Corker has neither the managerial savvy nor the experienced staff to fend off an expected blizzard of amendments from the fringes of both parties, such as breaking up big banks or scaling back the power of the Federal Reserve.
None of the political permutations will necessarily prevent passage of financial reform. But they almost assuredly imply that whatever emerges will be diluted into something that Wall Street could only have dreamed of a year ago.
