Financial reform bill puts GOP in dilemma

April 20, 2010

– John Kemp is a Reuters market analyst. The views expressed are his own –

Financial reform legislation is set to reach the Senate floor as early as this week. With U.S. President Barack Obama and Senate Majority Leader Harry Reid holding most of the cards, pressure on Senate Republicans and Wall Street to find a compromise is becoming intense.

The Senate Banking Committee’s own version of reform (S 3217) was placed on the calendar of the Senate late last week (Calendar No 349) from where the Democratic majority leader can call it up for debate at any time.

In practice, Reid will wait until the Senate Agriculture Committee has had time to approve its own version of derivatives rules. The Agriculture Committee claims jurisdiction over some aspects of derivatives law. It is due to meet on Wednesday to approve a bill drafted by Chairman Blanche Lincoln (D, Arkansas).

Under Senate Rules, the majority leader has almost absolute control over the order in which legislation is called up for debate. Once the Lincoln bill has been reported out of committee, Reid will have discretion to call up the banking and agriculture committee bills any time, which could be as early as Thursday this week.

The banking and agriculture bills need to be melded together in some way. Either Reid will offer a compromise text of his own incorporating elements of both, or the majority leader will bring up the banking bill, perhaps with some or all of the agriculture bill being offered as an amendment.

Ultimately, Senate legislation must be reconciled with the separate Wall Street Reform and Consumer Protection Act (HR 4173) promoted by House Financial Services Committee Chairman Barney Frank and approved by the House of Representatives in December last year by 223 votes to 202.

In practice, it looks like the Senate Banking Committee’s bill has superseded the House measure, and will form the basis of any final law. If the Senate passes a measure, it will be sent to the House for approval. If the House agrees without amendment, it will become law over the president’s signature. If not differences will have to be ironed out in conference committee.


Senate conventions and the standing rules of the chamber permit unlimited debate on any measure. To avert endless delay, for routine and non-contentious measures, the majority leader will normally ask for “unanimous consent” (uc) to set aside the normal rules and consider the bill under an expedited procedure.

In this case, Reid is unlikely to obtain unanimous consent. The majority leader will therefore offer a motion to proceed with the bill setting terms for debate. Since the motion itself is subject to a filibuster, the majority leader will need the support of at least 60 senators to invoke “cloture” limiting debate to just 30 additional hours.

The motion to proceed, once passed, would control debate on the bill itself. On final passage, only 50 votes are needed for approval (the vice-president can vote to break a tie).

The point of this detour into Senate procedure is that it helps explain the structure of the poker game each side is now playing.

The only point of leverage the Senate Republican caucus has is its power to block a motion to proceed and therefore prevent the bill ever coming to the floor in a manner it can be approved without unlimited debate.

But while Senate Republicans can prevent the matter coming to a head, the majority leader can raise the bill any time, as many times as he decides, and keep it on the floor of the Senate, and in the headlines, for as long as he wants. Reid can force the Republicans to go on the record opposing financial reform and keep media and public attention on Wall Street issues for as long as it suits his purposes.


And it suits Reid and the Democrats to keep the spotlight on this issue. Unlike healthcare, where Democrats were divided, and found lackluster and ebbing public support, the party is fairly unified on financial reform and seems more in tune with the popular mood, which wants tough reforms as payback for the financial crisis.

In contrast, Republicans appear divided and uncertain, anxious about being seen to align themselves too closely with Wall Street interests opposed to substantial change.

Keeping the spotlight on financial reform keeps Democrats united and their opponents divided and off balance. It keeps public attention on an issue the party hopes is a plus point, away from more controversial areas such as healthcare, which dominated the headlines only a few weeks ago, until it was pushed aside by financial reform and the retirement of Supreme Court Justice John Paul Stevens.

Congressional Democrats and the White House have found the perfect issue on which to take an aggressive stand.
If the bill passes, they notch up the second significant legislative victory in six months, on something that energizes the party’s core voter base and resonates reasonably well with the rest of the electorates.

If the bill stumbles, because the 41 Senate Republicans refuse cloture on a motion to proceed, Reid will force them to cast a vote on the record and tie themselves to Wall Street. The Democrats will then make it a centerpiece of a populist campaign in the autumn, running against both Republican obstruction and Wall Street itself.

Being linked to unpopular Wall Street interests is the last thing Senate Republicans want in the mid-term elections. The party would much rather turn the conversation back to healthcare, over-reaching by an activist government, ballooning deficits and unaffordable entitlement programs.


Reid will almost certainly force the 41 Republicans to make a recorded roll call vote against cloture. He might even challenge the Republicans to start filibustering the bill and keep it on the floor for a few days to maximize the publicity and embarrassment. Senate Republicans are keen to avert this sort of showdown.

The caucus unified last week to send a unanimous letter to Reid. Some have interpreted this 41-siganture letter as an aggressive filibuster threat. In practice, it seems more like a plea to be let into negotiations so the party could avoid embarrassment and vote for something that could be branded a bipartisan bill. “We encourage you to take a bipartisan and inclusive approach,” the signatories urged.

In contrast to healthcare, where many Republicans, and a large section of the electorate, favored no bill to the one the Democrats were promoting, on financial reform there is a clear majority for change. “Inaction is not an option,” as the Redrafting from scratch is not an option at this stage. Neither the White House nor Senate Democrats have any interest in doing the bill over again.

But Senate Democrats and the administration would probably offer some minor amendments to secure Republican support. Republicans and banking lobbyists will need to identify two or three key issues where they can secure compromise.

One will have to be the $50 billion bailout fund and issue of resolution authority. While this is a relatively inconsequential point, on which there are good arguments on both sides, the bill’s opponents have made it a signature issue. Since it was not originally suggested by the Treasury, though, it can easily be dropped. One or two other key changes are also possible at this stage, allowing both sides to declare victory and move on.

But it is much too late to change the basic form and direction of the bill. It is hazardous to predict the outcome of last-minute legislative maneuvering. But my guess is that this bill will be approved, by a lopsided majority, after a few amendments are agreed in the next few days, as quite a few Republicans sign on to neutralize the issue.
Otherwise, the matter will go before the voters in the fall.


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Posted by Thomson Reuters News Pro story – Financial reform bill puts GOP in dilemma « Libro de Notas | Report as abusive

It does not matter what they do. The havoc has been wreaked. The destruction has occurred. The American economy and that of the free world has been dealt a serious and injurious blow to it by the Communist Chinese. The Communist Chinese juggernaut continues on unslowed, unabated in its intensity and ferocity – it’s ultimate goal – if not to destroy free enterprise than to take it over or influence it completely at its will as it has done to its neighbors in Asia for a very long time. Any Wall Street ‘reform’ will only force financial markets to Chicago – which seems the real intent of what is happening now anyway.

Posted by cranston | Report as abusive

A 17% VAT (Value-Added-Tax) will take care of any Chinese factor. A 90% tax on short term (30day) profits and corporate executive bonuses, will take care of wallstreet (flash-trade or other) greed and corporate fraud.

Posted by Mott | Report as abusive

Financial reform would be welcome if it rested on three pillars: honesty, transparency, and simplicity. Alas, neither Democrats nor Republicans seem likely to offer up anything of the kind.

As to the Republicans fortunes in November, I see very little possibility that there will be any “bad news” for them. At this point they are all but guaranteed to take back both houses of Congress. The bad news is that they may then have to do something with that Congressional power other than posture, whine, and object.

Posted by JackMack | Report as abusive

This regulation is all about politics…we the voters know why the Obama team is doing this now….votes. They want to get more votes in November and in 2012. This bill is probably just as bad as the health care bill and those who penned it don’t know what’s really in it and what the ramifications of it are….what we’re sure of is that it’s not a bad thing for Wall Street…Mr. Obama is very beholden to Wall Street…so stand your ground Republicans…we understand…speaking as a Democrat…possibly former Democrat.

Posted by lezah2 | Report as abusive

Yawn…wake me up in November.

Posted by Gotthardbahn | Report as abusive

blah, blah, blah.

Posted by leftcenterright | Report as abusive

Despite this “reform” nobody seems to believe that the Dems or Repubs will work in the people’s best interest. Good. Maybe we’re finally wising up. It’s time to stop playing their Hatfield’s against the McCoy’s game and unite as one entity. We need change all right, just not the kind either side is advertising.

Posted by GLK | Report as abusive

How many former Goldman Sachs employees work in the Treasury and Obama Administration???

Who in Congress was responsible for overseeing the SEC?

Congress has been controlled by the Democrats for 3.5 years. They have been willing accomplices of GS and other bankers. Fire every incumbent on the SEC oversight committee November 2nd.

Posted by randydutton | Report as abusive

Goldman’s co-chairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary.

Posted by randydutton | Report as abusive

Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites.

Read the article american+bubble+machine&type=

Posted by randydutton | Report as abusive

The moved the link. Try this for the update Rolling Stones article s/;kw=[3351,11459] titled
The Great American Bubble Machine
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression — and they’re about to do it again.

WHY does the Congress allow these leeches into government? Why has Obama absorbed them into his administration to then oversee the very organizations from whence they came?

Who really is running our government?

Posted by randydutton | Report as abusive

Funny how the Republicans (who brought you this Great Republican Recession) only complain about deficits when the Dems are in the White House.

Check out the graph linked below, and see how Reagan, Bush 1 and Bush 2 EACH doubled or tripled the national deficit. Where were all the Republicans then? .html

Notice also how the price of oil tripled under Bush. Do you think that his oil lobby is unhappy about that?

How many billions of taxpayer dollars did Cheney’s employer Halliburton take? Do you think they are unhappy about that?

When Bush took office in 2001, gas was about $1.60 / gallon.Since then it steadily rose to over $4 per gallon, until it plummeted with the collapse of the economy in 2008. Who was he representing?

If a citizen drives 15000 miles per year, and gets 20 mpg, he buys 750 gallons in a year. With prices on the rise again, who know where it will end. Let’s assume we will have an average of $3.60 for some time. That is exactly $2 above what it was when Bush took office, and still more than $0.50 off the peak.

If that is the case then the citizen in question will be paying $1,500 MORE in gasoline per year than when Bush and the Republicans took office. That means people

will be paying $1,500 TAX to the oil companies – including the Arab countries where it comes from. This is an enormous tax on the American economy!

Thank you to all the Republicans & Republican think-tanks who backed all the Bush policies that got us here.

Again – is Bush unhappy? Is Cheney unhappy? Is the CEO of Exxon-Mobil unhappy? I don’t think so.

Think about it.

Posted by jmmx | Report as abusive

@ RandyDutton

you say:
“How many former Goldman Sachs employees work in the Treasury and Obama Administration??? ”

They all worked for Bush first!!! So don’t go pointing fingers at Obama. Republicans like to do this because they are trying to distract people from the very simple and undeniable fact – the Great Republican Recession happened on THEIR watch.

Remember – it started in 2007 (if not earlier) and Obama is still trying to clean up THEIR MESS.

Posted by jmmx | Report as abusive

Excellent, interesting article. Thanks Jack Kemp.

Posted by AdamSmith | Report as abusive

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