By Alexander Bolton - 04/15/10 10:00 AM EDT
The debate over Wall Street reform presents Sen. Mitch McConnell (R-Ky.) with a major test of his leadership as he tries to keep GOP lawmakers unified despite public anger at large financial institutions.
McConnell’s political stock rose over the past year as he kept his conference united in opposition to healthcare reform, nearly killing President Barack Obama’s top domestic initiative.
McConnell has asked his colleagues to follow the same ground rules he set for the healthcare debate: before they strike any agreement with Democrats, they must explain their intended deal to the rest of the conference.
This strategy effectively kept Sen. Chuck Grassley (Iowa), ranking Republican on the Finance Committee, from cutting a side deal on healthcare reform.
But lawmakers believe there is more political momentum behind financial regulatory reform than healthcare reform.
“It is very clear that voters understand that you have got to have significant financial reform,” said Sen. Ron Wyden (D-Ore.), who explained there is a public perception that the current system protects the biggest banks.
“Being against everything, without showing that you’ve got alternatives, ones that can generate bipartisan support, [is] not going to be acceptable,” added Wyden, who tried to negotiate an agreement on healthcare reform. “People want to know what you are for.”
One GOP senator estimated there could be as many as 20 or 25 Republican votes for a Democratic financial regulatory reform bill if Senate Banking Committee Chairman Chris Dodd (D-Conn.) restricted some new powers proposed for the Treasury Department and Federal Deposit Insurance Corporation (FDIC).
McConnell has criticized the bill for enabling Treasury and FDIC officials to keep troubled institutions on life support using taxpayer dollars.
But Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, said that problem could be fixed easily.
During a floor speech Wednesday, Corker acknowledged the validity of “criticisms about the [financial reform] bill potentially creating some large loopholes for large institutions not to go through orderly liquidation.”
“But the fact is, I think we could fix those in about five minutes,” he said.
McConnell has taken a strong stance against the bill as drafted by Dodd with the guidance of administration officials. He said in a Wednesday floor speech that the bill would lead to more taxpayer bailouts of Wall Street, then convened a meeting of the GOP conference in the afternoon to attempt to reach consensus.
Sen. Judd Gregg (R-N.H.), who recently predicted the legislation will pass, said on Wednesday McConnell was urging Republican senators to oppose the bill in an effort to force Democrats to negotiate.
“We want to be back at the negotiating table, and the way we get there is by making it clear that they're not going to be able to pass it,” said Gregg, who earlier on Wednesday had said some GOP arguments against the bill were “a little over the top.”
At the GOP meeting, senators discussed a letter urging the administration and Democrats to keep a bipartisan approach to the issue.
Some Republicans are concerned that they will lose the public debate if they can’t come up with an alternative to the Democratic proposal to rein in financial institutions.
“It’s not so much keeping folks together as all of us being united in a common endeavor,” said Sen. Jon Kyl (R-Ariz.).
GOP lawmakers say they don’t think McConnell is trying to kill the bill, as he tried to defeat healthcare reform.
Instead, they believe he is trying to maintain party unity to give Sen. Richard Shelby (Ala.), the ranking Republican on Banking, more negotiating leverage.
They also note that discrediting the Democratic bill would give political cover to GOP incumbents such as Sen. Bob Bennett (Utah) and John McCain (Ariz.) who are in the midst of tough primary races.
Bennett and McCain both voted for the Wall Street bailout in 2008 and now have to answer to angry conservative primary voters who opposed the measure.
By arguing that the Democratic reform bill would enable future bailouts, McConnell has given Bennett and McCain a chance to redeem themselves with some conservative Republicans.
Maine Sen. Susan Collins, a crucial Republican swing vote, told reporters Wednesday that she favored several provisions in the bill and remains in play.
Collins, however, criticized Democrats for politicizing the debate, a sign that McConnell’s criticisms of the administration have gained traction.
“Unfortunately, the administration is evidently more interested in using this debate as a political issue than actually addressing on a bipartisan basis the many weaknesses that are currently built into our economy,” McConnell said Wednesday.
McConnell told Obama during a meeting at the White House on Wednesday that he was concerned about efforts by administration officials to hold Democrats back from negotiating with Republicans, according to a GOP aide.
McConnell then accused the administration of trying to bulldoze him in negotiations.
“They wanted to jam us,” McConnell told reporters after the meeting. “I naively thought we were heading in that direction until the strings were pulled on the Democratic leaders.”
McConnell’s line of attack has helped persuade Sen. Scott Brown (R-Mass.), another important swing vote, to oppose Dodd’s bill.
Brown said Dodd’s legislation would hurt community banks and small businesses and is “clearly being used by the administration to drive a wedge” and “that’s wrong.”
“The bottom line is the bill that is being composed right now by the chairman has been influenced by the administration to the point where it’s politics over really solving problems,” Brown said.
But more conservative lawmakers, such as Grassley, believe they can support a bill if changes are made.
“There are a few things that would keep me from voting for it, but I think those things can be compromised,” he said.
Sam Youngman contributed to this article.