Late update: Financial reform negotiators agreed tonight on a party line vote to make fixes sought by Sens. Scott Brown, Susan Collins, and Olympia Snowe, changing the way the legislation will be paid for. Speaking to reporters after the impromptu conference committee session, House Financial Services Committee Chair Barney Frank implied strongly that he'd received assurances that the Senate now has 60 votes to pass Wall Street reform. The House will likely take the bill up tomorrow, while the Senate may have to wait until after the July 4 recess to hold its final vote.
Here's how Democrats propose to placate moderate Republicans, who've been threatening to renege on their previous support for Wall Street reform. Instead of paying for the $19 billion cost of financial regulation bill by taxing big banks, the legislation will now raise money in two ways: Ending TARP, and raising the minimum target for FDIC's Deposit Insurance Fund.
Democrats took the extraordinary step this evening of reconvening the financial reform conference committee and making the switch in order to secure 60 votes for the legislation in the Senate. Brown said he'd bolt from the bill without a new pay-for, and Maine Republicans Collins and Snowe made similar threats, leaving Democrats likely vulnerable to a Republican financial reform filibuster.
The new proposal is already meeting fierce opposition from Republicans who already oppose the entire legislation, including Sens. Judd Gregg (R-NH) and Richard Shelby (R-AL). But Democrats have been conferring closely with Republican swing votes and presumably wouldn't be pushing it if it didn't meet their concerns.
The plan covers $11 billion worth of the $19 billion deficit, according to CBO, by prohibiting new programs under TARP and eliminating any further TARP authority beyond what's already been authorized. The $8 billion (plus a bit more) comes from increasing the size of the FDIC's Deposit Insurance Fund, by increasing premiums on depository institutions with $10 billion in assets or more.
In part, then, it removes a direct tax and replaces it with insurance fees.