Chris Dodd: White House Missteps On Regulatory Reform
Senate Banking Chairman Chris Dodd may like the Obama’s administration’s new bank proposals, but he’s not happy about the roll-out.
Dodd chastised the White House for announcing its latest salvo against the Wall Street mere days after Democrats lost the Massachusetts Senate special election, saying the perceived politics of the move has made it difficult to sell the measures to his colleagues.
“The idea that the administration made such a major point a week or so ago seemed to many to be transparently political and not substantive. And it’s adding to the problems of trying to get a bill done,” Dodd lectured Deputy Treasury Secretary Neal Wolin and, to a lesser extent, former Federal Reserve Chairman Paul Volcker, who appeared before Dodd’s committee Tuesday.
Dodd’s candid remarks came at the end of a lengthy hearing in which Dodd and other Democrats endorsed the bank proposals. But his lecture warned the White House that there’s no guarantee he can get the new measures into the Senate bill – and if they don’t, it’s at least partly the administration’s own fault.
Dodd said he knew that President Barack Obama had settled on the proposals weeks before the Massachussetts election. "[But] the way sometimes these things are announced doesn’t help. And I make recommendations and so forth as to how to do this stuff and then it falls on deaf ears,” Dodd said, suggesting he warned the White House not to announce the proposals when it did. “So we end up in the situation where I'm grappling around here trying to convince people there's a substantive idea here.”
Dodd declined to elaborate further on what advice the White House had ignored, when asked by POLITICO after the hearing.
The failure of the Senate to include the new bank proposals would be a major blow to Obama’s effort to harness voters’ populist anger to Democrats’ advantage.
The measures in question certainly sound like winning political issues: One would ban commercial banks from engaging in high-risk investment activities – the so-called “Volcker rule” since the former Fed Chairman is its architect; the other seeks to curb the size of the nation’s biggest financial institutions.
And at least initially they appear to appeal to a bipartisan desire to reign in the size of the financial behemoths whose risky behaviors triggered the financial crisis.
Sen. John McCain (R-Ariz.), for instance, has introduced legislation with Democrat Maria Cantwell that is similar to the Volcker rule, seeking to restore the Depression era wall between commercial and investment banking. McCain said he hasn’t looked at the details of the White House proposals, “but I’m in agreement … we ought to take measures to prevent institutions from being too big to fail. That’s certainly the opinion of my constituents in Arizona.”
But, as Dodd scolded the White House Tuesday, the new proposals come late in the game and in a way that makes Republicans immediately suspect the motives behind them.
The House passed a financial reform bill in December. Dodd introduced a discussion draft in November. The round of bipartisan talks that started after Dodd’s draft have been going on for months, too, and Dodd wants to wrap things up in time for an early March markup. To that end, he has asked the bipartisan working groups that are negotiating key portions of the bill to submit to him their language by mid-February.
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“I don't want to be in a position where we end up doing nothing because we tried to do too much at a critical moment,” Dodd said.
And Dodd sent his strongest signal yet that he’s committed to making tough compromises in order to get a bipartisan bill – a stance that means key White House priorities – including the Volcker rule – could get cut in order to get that deal. Also at risk is the adminstration’s proposal to create a stand-alone Consumer Financial Protection Agency.
“I don't want to go to the floor of the United States Senate begging for a 60th vote. I'm not going to do that,” Dodd said at the end of the hearing. He reiterated the point to reporters afterward, saying he doesn’t think the Senate could withstand another knock-down, drag-out fight.
It’s also clear that the lack of detail hasn’t helped the administration’s case on Capitol Hill. Industry lobbyists and lawmakers alike complain that they can’t judge the new proposals without detailed language from Treasury – language that Treasury officials still can’t say when they’ll be able to provide.
“When we call down and say, ‘How does it work?’ and specifically what you had in mind, I expect answers to the questions,” Dodd told Wolin. “We've made the calls and we're not getting good answers.”
Nonetheless, none of the committee’s Republicans outright rejected the proposals Tuesday. Sen. Richard Shelby of Alabama, who has the most influence among Republicans over the final shape of the bill, he is “willing to consider any proposal that will strengthen our regulatory framework and help our economy — including the president’s latest recommendations.”
But he, too, tweaked the timing of the measures’ release. “I hope … that this is not an indication that the administration intends to substitute thoughtful analysis with whatever polls well on a given day,” said Shelby, the top Republican on the committee.
Other Republicans expressed more resistance.
Sens. Bob Corker (R-Tenn.) and Mike Johanns (R-Neb.) both took great pains to argue that the new proposals, had they been in place before the crisis would not have prevented any of the calamities that occurred, an argument being made by financial industry lobbyists opposed to the new measures.
Volcker urged the senators to look forward and also to see it as part of the broader reform package, not a cure-all.
“What I want to get out of the system is taxpayer support for speculative activity, and I want to look ahead,” Volcker said under questioning by Johanns.
“I tell you, sure as I am sitting here, that if banking institutions are protected by the taxpayer and they are given free rein to speculate, I may not live long enough to see the crisis, but my soul is going to come back and haunt you.”
Sen. Judd Gregg (R-N.H.), another committee member, said before the hearing that he can’t assess the proposals until he sees “hard language” because the implications are just too massive, and he also expressed doubt that the final administration proposal will actually line up with Volcker’s ideas.
But the respect Volcker commands across the aisle has him listening. “The guy has got a folk hero status when it comes to financial policy and deservedly so,” Gregg said.
“It means what he suggests is going to be looked at very seriously, because he’s somebody we should be taking seriously when he comes up with ideas.”
Sources: Politico, MSNBC
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