By Alexander Bolton - 04/20/10 07:41 PM EDT
Senate Democrats and Republicans said a deal on Wall Street reform could be reached by next week after the two sides on Tuesday resumed negotiations in earnest.
Faced with solid GOP opposition, Democrats acknowledged they do not have enough votes to begin debate on a bill crafted by Senate Banking Committee Chairman Chris Dodd (D-Conn.), who has re-launched talks with Sen. Richard Shelby (R-Ala.).
Sen. Bob Corker (R-Tenn.), who for a time spearheaded negotiations on the bill, said lawmakers are very close to an agreement.
“I think there’s a possibility we get where we need before the vote even takes place,” Corker said.
There were signs Tuesday that Democrats were considering a major concession: dropping a $50 billion fund designed to wind down troubled banks — with assets of at least $50 billion — that pose a risk to the financial system.
“We had a long discussion in our caucus today,” Senate Majority Leader Harry Reid (D-Nev.) told reporters after the Democrats’ lunch meeting. “That’s something we’re going to take a look at.”
Sens. Jack Reed (D-R.I.) and Judd Gregg (R-N.H.) are leading negotiations to set up the Consumer Financial Protection Bureau and regulate financial derivatives that would fall under the jurisdiction of the Securities and Exchange Commission (SEC).
“It looks like to me that Judd and Jack are coming close to an agreement,” Corker said. “We may avoid a drama.”
Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) is negotiating with Sen. Saxby Chambliss (Ga.), the panel’s ranking Republican, to regulate commodities-related derivatives that fall under the jurisdiction of the Commodity Futures Trading Commission. Senate sources familiar with the talks say they are proceeding well.
“I can tell you … that Sen. Shelby thinks there’s a very serious effort to re-engage and get a result,” Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday. “Serious discussions are under way, and that’s a good sign.”
The two parties had appeared headed for a partisan showdown on the Senate floor until the talks resumed. The White House had halted negotiations last month, believing Republicans would succumb to political pressure to support the Democratic bill.
The dynamic changed after 41 Republicans signed a letter to Reid pledging unified opposition to the bill. On Monday, Sen. Susan Collins (Maine), a pivotal Republican vote, said she would support a GOP filibuster if Democrats brought Dodd’s bill to the floor without changes.
“What happened as a result of the 41 letter is that serious talks have resumed,” McConnell said.
“We had a chance to get a report from Sen. Shelby and others at lunch today. I’m convinced now there is a new element of seriousness attached to this, other than try[ing] to score political points,” McConnell said.
Democrats and Republicans have been close to reaching an agreement for weeks, according to people familiar with the negotiations. The biggest obstacle to the deal appears to have been politics more than policy differences.
“We’ve been this close for weeks,” said a Democratic aide, indicating the difference with a half-inch of space between thumb and forefinger. “It’s just been a political decision by the GOP leadership over whether to sign on.”
Republicans have been leery of signing on to a deal out of concern that the party’s conservative base would see them as caving in to Democrats.
Democrats have played politics themselves. When a deal was within reach in early March, White House officials cut off the negotiations, convinced they could score political points by portraying Republicans as the servants of big banks.
McConnell said he told President Barack Obama at a meeting last week that White House Chief of Staff Rahm Emanuel had cut off negotiations.
“I pointed to Rahm Emanuel and said, ‘You pulled them back and ended the conversations, so I guess you decided it was better to have a political issue,’ ” McConnell said. The GOP leader said the president did not dispute his interpretation.
Some of the political games continued in public on Tuesday, such as when Reid vowed to put the Dodd bill on the floor and force Republicans to kill it.
“Remember, there are only 59 of us, so if a single Republican is not willing to join with us, there will be no Wall Street reform,” Reid said Tuesday, inviting the GOP to a high-stakes game of political chicken. “Republicans will have killed Wall Street reform. I am confident that will not happen.”
Democrats counter that the fund is necessary to bring about the orderly liquidation of a financial institution that threatens to trigger a financial crisis.
They note the $50 billion would be funded by large banks.
Republicans have also raised concerns about regulating banks through the Consumer Financial Protection Board.
One Republican Banking Committee source said the consumer-allied board could set new rules but that their enforcement should be left to prudential regulators, such as the Office of the Comptroller of the Currency and the Federal Reserve, which are more focused on the long-term health and viability of banks.
Republicans have also asked for provisions that would protect community banks from excessive regulation.
“We don’t have any Wall Street banks in South Dakota, but we have a lot of community banks, we have a lot of credit unions, we have a lot of smaller institutions that — that extend credit that are very, very worried about this,” said Sen. John Thune (S.D.), chairman of the Senate GOP Policy Committee.