One of the most far-reaching pieces of the Senate’s Wall Street reform bill has powerful enemies. The White House doesn’t like it. FDIC chief Sheila Bair doesn’t like it. Obama adviser Paul Volcker–the patron saint of financial reform–doesn’t like it. And neither do a number of key Democrats, including Banking Committee Chairman Chris Dodd. All of them say that a controversial proposal to force financial firms to spin off their derivative-trading desks into separate entities goes too far.
But they may have gotten themselves stuck with it–at least for now. With their assent, the plan was authored by Sen. Blanche Lincoln (D-AR), who designed it to guard her left flank against a somewhat formidable primary challenge, and has been boasting of it on populist grounds for weeks. And that according to Republican and Democratic Senate sources, has led Democrats to quietly agree to postpone any changes they decide to make to her proposal until after this Tuesday’s election has passed, to avoid embarrassing her in front of voters.“I got a pretty good idea that it won’t be dealt with before Tuesday,” Sen. Bob Corker (R-TN) said last night, in response to a question from TPMDC.
Democrats will hold a special caucus meeting this afternoon, where they could make a final decision on how to proceed.
For a couple reasons, the move may come in as welcome news to Republicans, many of whom say they are still broadly dissatisfied with a number of key provisions in the bill, and want the Senate to spend more time debating: both to try and alter those provisions, and to eat up precious floor time the Democrats will need if they’re to round out the agenda before the November elections. And, of course, they know how to play this game too: last week a vote on the Fed audit amendment was delayed for several days to accommodate Sen. Bob Bennett (R-UT), whose primary contest ended this weekend. (Bennett lost, and the amendment passed unanimously yesterday.)
One option for Democrats, though, is to leave Lincoln’s title in the bill unaltered, and deal with the spin-off provision, which isn’t part of the House legislation, when the two chambers meet to iron out differences between their bills. That would allow them to protect Lincoln without wasting several days of floor time.
Corker knows this: “So the question is will it be dealt with after that or will they try to fix it in conference where they can do it behind closed doors.” And we should know soon how prescient he’s being. Senators on both sides of the aisle, wary of coming down on the side of Wall Street, have thusfar been reluctant to touch Lincoln’s provision, fearing the potential political backlash.
Of course, there are still 41 Republicans, and if they decide they don’t like where the bill or the process is headed, we could see them band together to force another delay, just as they did several weeks ago before the bill came to the Senate floor. More on that later today.