Wall Street bill tests Scott Brown’s clout

Sen. Scott Brown (R-Mass.) may learn by week’s end how much clout he has as the junior-most senator.

In one of his first tests since a January election win that upset the Senate’s balance of power, Brown is pushing, largely behind the scenes, for changes in the Wall Street overhaul bill that would benefit Massachusetts’ interests.

Banks and insurance companies, including some in his home state, are counting on Brown and a handful of others to win changes in a heavily lobbied part of the bill known as the “Volcker rule.”

But members of the majority are counting on him too. Brown was one of four Republicans to support the legislation in May after receiving assurances — including from House Financial Services Committee Chairman Barney Frank (D-Mass.) — that his concerns would be resolved in conference.

A 43-member House-Senate committee intends this week to put the final touches on the overhaul bill. High-level talks between the House Financial Services Committee, Senate Banking Committee and Obama administration are likely to decide whether Brown’s concerns are satisfied, a congressional aide said — and whether Democrats can win the Republican’s vote.

The provision at issue, named after Paul Volcker, the Obama administration adviser and former Federal Reserve chairman, aims to limit risky behavior on Wall Street by barring proprietary trading at banks and restricting bank sponsorship of hedge and private equity funds.

Volcker himself and several Democratic senators have opposed some of the concerns he has raised. In a May letter, Volcker said he “absolutely” is against including a small allowance for banks or bank holding companies to invest in funds for marketing or relationship purposes.

“Allowing a bank to invest in a speculative fund goes against the very intent of the bill as we seek to define those activities that are worthy of government protection,” Volcker said.

Brown was locked in negotiations with Senate Majority Leader Harry Reid (D-Nev.), Frank and Sen. John Kerry (D-Mass.) as the Senate took up the legislation. He had expressed concerns that a proprietary trading ban would sweep in home-state companies like Fidelity, MassMutual and trust companies that are regulated as bank holding companies. 

He also was worried that the rule would hurt asset-management firms that sponsor or have relationships with hedge funds and other investment pools.

Brown held back his vote on the first motion to end debate on the bill, saying his concerns had not been addressed fully. A day later, after receiving two letters from Frank that convinced Brown his concerns would be met, Brown joined Democrats to end debate and later voted for the bill.

Frank defended the House version of the legislation, arguing that it does not prohibit depository institutions or their parent holding companies from “customer-driven trading” for asset management purposes. 

“All of these measures are important to our state and none of them threaten or weaken the broad objectives of comprehensive reform that guided our work, and I will insist that they be maintained in the final bill,” Frank wrote. 

In a second, follow-up letter, Frank added that the House bill does not bar those firms from “limited fund sponsorship and investment to meet the needs of their clients as part of traditional asset management activity.”

Consumer advocates and Democratic Sens. Carl Levin (Mich.) and Jeff Merkley (Ore.), who pushed for a more explicit version of the rule in the legislation, are concerned about any changes for bank sponsorship of hedge funds or private equity firms.

“For me, it would be a bad mistake,” Levin told reporters last Thursday. “It would move us in the wrong direction … I think it would be a fundamental mistake.”

Brown’s office did not comment for this article.

Tags Carl Levin Harry Reid Jeff Merkley John Kerry

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