SCENARIOS-Pivotal election for key senator in Wall Street reform

By Reuters Staff
June 7, 2010

By Charles Abbott

WASHINGTON, June 7 (Reuters) – Senator Blanche Lincoln faces possible elimination in a Democratic run-off primary in Arkansas on Tuesday, putting at risk her tough stance against the big banks in Wall Street reform.

Lieutenant Governor Bill Halter held a small lead over Lincoln in polls of likely voters ahead of the vote. Lincoln led in the May 18 primary but did not get an outright majority to claim nomination for a third Senate term.

Lincoln is the author of a provision to force banks to spin off their swaps desks, which potentially could cost them billions of dollars in revenue. Lincoln says the step would prevent taxpayer bail-outs of banks due to risky trades.

Because of anti-Washington sentiment, Lincoln is regarded as one of the most vulnerable incumbents in this year’s congressional elections. Opinion polls give Republican nominee John Boozman a huge lead for the general election in the fall.

Here are scenarios for the runoff election and its impact in Washington:

LINCOLN WINS THE NOMINATION

A victory would vindicate Lincoln as a centrist in tune with the political mainstream and elevate her stature in House-Senate negotiations expected to begin this week on financial reform. Her swaps-desk language ranks as one of the key issues to resolve.

Financial reform played a small role at best in the primary election but Lincoln argued as chairman of the Agriculture Committee, which oversees the futures markets, she is in a position to get results on important matters.

With a come-back victory, Lincoln would gain momentum for the general election in November. Her folksy approach — she speaks proudly of being a farmer’s daughter — has fitted well with Arkansans since she won a House race in 1992.

HALTER OUSTS LINCOLN IN RUNOFF

Victory by Halter would be a stinging loss for the Democratic establishment, including President Barack Obama and former President Bill Clinton, and presage losses by incumbents in the fall. Two incumbent senators, Robert Bennett, Utah Republican, and Arlen Specter, Pennsylvania Democrat, were denied renomination this spring during intraparty contests.

Labor unions and political liberals poured money and workers into Arkansas because they say Lincoln is not progressive enough on health care. They would use the race as a warning to other senators against supporting conservative ideas.

Halter’s brand of economic populism resonated strongly with rural voters in the May 18 primary, so he could have a foothold in normally Republican areas if he is the nominee. He also would benefit from anti-incumbent anger among voters.

LINCOLN REMAINS A FACTOR

Even if she loses the runoff, Lincoln would remain in office through the end of the year and in position to affect Wall Street reforms in the near term.

A loss can translate to less legislative leverage; lawmakers are attuned to electoral results. There have been repeated predictions that the swaps-desk language will be dropped.

Lincoln has said she will fight for a spin-off of swaps desks and sometimes in House-Senate negotiations, persistence pays off. Negotiators operate by consensus and usually try to find an agreement within the bounds of each chamber’s language.

There is no House provision similar to Lincoln’s plan.

REPUBLICAN BOOZMAN IS FALL FAVORITE

A political conservative, Boozman, who has represented northwestern Arkansas in the U.S. House of Representatives for a decade, won the Republican nomination with 53 percent of the vote in an eight-way race. He led Lincoln and Halter by as much as 2-to-1 in a poll taken immediately after the primary.

Political analysts consistently list Arkansas as one of the states where Republicans are likely to pick up Senate seats this year. Arkansas voted Republican by a 3-to-2 margin in the 2008 presidential election. Polling this year shows strong support for conservative policies.

Boozman says he wants to balance the federal budget and cut taxes. But, congressmen generally are not well-known outside their districts. Whoever Democrats choose, their candidate will have more experience in winning a statewide election.

(Reporting by Charles Abbott, Editing by Sandra Maler)

((chuck.abbott@thomsonreuters.com; +1 202 898 8319))

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