Blue Dogs quiet on financial overhaul

Blue Dog Democrats have been largely silent on financial regulatory reform as House leaders advance one of President Barack ObamaBarack Hussein ObamaUS set to admit fewest refugees in decades: report NRATV host says Obama owes Parkland students an apology over shooting Paltry wage gains, rising deficits two key tax reform concerns MORE’s highest priorities.

The House Financial Services Committee this week will continue to mark up legislation overhauling the financial system as House leaders hope to hold a floor vote as early as mid-November. After passing legislation last week restricting the multitrillion-dollar market for financial derivatives, committee lawmakers are now debating a controversial new Consumer Financial Protection Agency (CFPA).

Yet the 52-member group of Blue Dog Democrats, not known for its silence, has barely whimpered.

The silence is notable given that the centrist bloc has weighed in significantly on healthcare, climate change and other domestic priorities this year, using its numbers to reshape much of that legislation.

Blue Dog Co-Chairman Baron Hill (D-Ind.) said last week the group has barely paid attention to financial reform.

“We had a little discussion about it on Tuesday,” Hill said. “It’s been completely swallowed by healthcare.”

Rep. Walt Minnick (D-Idaho), a freshman Blue Dog, has criticized setting up an entire new regulatory agency over consumer financial protection. But Minnick does not speak for the entire group, and some Blue Dogs are working with more liberal members to tweak, not scuttle, the new agency.

Blue Dog Rep. Dennis Moore (D-Kan.) and Rep. Brad Miller (N.C.), a more liberal Democrat, spearheaded an amendment to lift the agency’s burden on small community banks and credit unions.

The amendment would leave existing federal regulators with examination and enforcement powers over banks with less than $10 billion in assets and credit unions with less than $1.5 billion in assets.

The effort would leave the new agency with the full breadth of the proposed powers over roughly 115 banks and 80 credit unions, Miller said.

That effort was viewed as a major amendment to the agency and could mollify some of the concerns from the powerful community bank and credit union lobbies. “We strongly support the amendment,” said Steve Verdier, senior vice president at the Independent Community Bankers of America (ICBA). “It’s a big step forward.”

Bank and credit union lobbyists are continuing to press lawmakers to alter other provisions in the bill, including to limit the agency’s power to set rules and regulations.

Dan Berger, executive vice president at the National Association of Federal Credit Unions (NAFCU), said it was “a step in the right direction,” but that the association would like to a see a “full exemption from this costly and unnecessary regulatory burden.”

The Credit Union National Association said it remained opposed, even with the amendment adopted.
Moore himself admitted that financial reform has not registered with Blue Dogs as a group.

“Some individuals are [concerned], but not as a group,” he told The Hill. “This is kind of very specific, as you know, and there is not everybody that has working knowledge of all this right now.”

House Agriculture Committee Chairman Collin Peterson (D-Minn.) has been working on legislation restricting financial derivatives. Peterson is a senior Blue Dog, but his focus is also largely due to his committee retaining oversight of the Commodity Futures Trading Commission (CFTC), one of the federal agencies central to the derivatives legislation.

The Agriculture Committee will mark up a derivatives bill on Wednesday.

The policy disconnect also may stem from the fact that Blue Dogs are heavily represented on the Energy and Commerce Committee — which did most of the work on climate change and was the only committee not to see its portion of the healthcare bill sail through without interruption.

At the same time, Blue Dogs have scant representation on the Financial Services Committee. Instead, the New Democrats, a separate group of centrist Democrats, have led the charge on major changes to legislation in the Financial Services Committee. They have worked closely behind the scenes and with amendments on the measures regulating derivatives and consumer financial products.

The New Democrats are working now to balance the scope of federal and state powers under the new agency. The Obama administration, House Financial Services Committee Chairman Barney Frank (D-Mass.) and other liberal Democrats are in favor of allowing state and local officials to pursue additional or stronger regulations. Centrist Democrats and the financial industry support allowing federal officials to pre-empt state officials.

“An important principle involved here is that Washington doesn’t always know best,” said Michael Barr, assistant Treasury secretary, “that sometime states set standards for their citizens that should be higher, can be higher than the federal standard. It’s absolutely critical that we have a high national standard that operates around the country and that that is a floor, not a ceiling, on state activity.”

Still, despite the group’s low profile on the issue, recent polling indicates that voters in Blue Dog districts are in strong support of financial reform.

More than two-thirds of voters in Blue Dog districts back the creation of the new consumer regulatory agency, according to a poll conducted by Lake Research Partners. Those polled also favored new regulations for the derivatives market by a margin of more than 40 percentage points.

And Democratic aides said that the Blue Dogs may very well weigh in, perhaps substantively, when financial reform comes to the floor.