Senators Scott Brown (R-MA) and Olympia Snowe (R-ME) both endorsed the Dodd/Frank Financial Reform Act yesterday. Senator Susan Collins (R-ME) was already supporting the bill, and the backing of three Republicans will give Democrats the 60 votes they need. The White House describes this bill as their top legislative priority.
Only 51 votes are needed for passage, but 60 votes are necessary to stop a GOP filibuster. The vote will be held this week, and Democrats will not have to wait for the appointment of a successor to the late Sen. Robert Byrd (D-WV).
What is Happening on Capitol Hill?
The legislation has already been approved by the House of Representatives. Four GOP Senators supported the bill when it was first considered in May, but in recent weeks Brown and Snowe had balked at revisions made by the joint House-Senate committee. Senator Charles Grassley (R-IA) also voted for the bill the first time but is now undecided. He will not vote to cut off debate.
Sen. Maria Cantwell (D-WA) voted no the last time but has since changed her position. Cantwell’s colleague Patty Murray (D-WA) faces defeat this November and the frontrunning Republican opposes Dodd/Frank. He had been saying he agreed with Cantwell and that put Senator Murray in an awkward position.
Sen. Ben Nelson (D-NE), who received the “Cornhusker Kickback” on health care reform, is once again threatening to change his vote. He was in favor of the bill the first time but now says Nebraska banks are concerned because the new regulations have not been written.
If Nelson does bolt, Democrats will have to wait for Byrd’s replacement which could come as early as Friday. Liberal Sen. Russ Feingold (D-WI) will be voting with the Republicans, and he did so the last time.
What is the Purpose of the Legislation?
Chairman Barney Frank (D-MA) of House Banking Committee says the major purpose is to rein in the use of complex financial securities known as derivatives. The legislation would create two new agencies to oversee hedge funds, credit-rating agencies and mortgage firms.
Frank says the bill is necessary because these institutions are not covered by current laws. The bill gives the government authority to seize teetering financial firms.
What Has Senator Brown Accomplished?
Brown was able to demand that Democrats drop their planned $19 billion tax on banks and large financial firms. Brown said the banks would increase fees, and this would be a back door tax increase. Brown was also successful in having the Democrats agree to an early end of TARP (the Toxic Asset Recovery Program).
Brown was included in Time magazine’s recent list of the”100 Most Powerful People,” and the Boston Globe’s annual survey indicates he is the most popular politician in the Bay state. He personally conducted negotiations on financial reform with Treasury Secretary Timothy Geithner.
How Did Senator Brown Explain His Position?
The Senator told reporters yesterday:
While it isn’t perfect, I expect to support the bill when it comes up for a vote. It includes safeguards to help prevent another financial meltdown, ensures that consumers are protected, and it is paid for without new taxes. That doesn’t mean our work is done. Further reforms are still needed to address the government’s role in the financial crisis, including significant changes to the way Fannie Mae and Freddie Mac operate. . . A lot of folks say we shouldn’t do anything. Well, I disagree. I think we should do something.
Is Brown a Conservative?
The Senator describes himself as a moderate conservative. In his speech last January on the night he won a dramatic upset victory to claim the seat of the late Ted Kennedy (D-MA), Brown said he would not always vote with Republicans.
He has made several campaign appearances on behalf of Republicans and his major theme is that a trillion dollars in stimulus spending has still not created one new permanent job. Brown angered liberals by voting against the repeal of “Don’t Ask, Don’t Tell” (gays in the military) and says he is against the extension of unemployment benefits.
What Groups are in Opposition to the Financial Reform Bill?
While conservatives are certainly opposed to the Dodd/Frank bill, opposition is not limited to the right wing and includes:
Independent Community Bankers of America.
National Association of Home Builders
American Bankers Association
The Financial Services Roundtable
American Council of Life Insurers
Financial Services Forum
US Chamber of Commerce
National Auto Dealers Association
Why Are Conservatives Opposed to the Dodd/Frank Bill?
Conservatives say the result of Dodd/Frank will be adverse changes to the nations financial system, and increased costs. They noted both higher ATM fees and the end of free checking as banks pass on the costs of new regulations.
Anticipating the passage of Dodd/Frank, Wells Fargo has just eliminated it’s free checking account program. Other banks may now follow suit.
Sen. Mitch McConnell (R-KY), the Minority Leader, says the bill “will guarantee perpetual taxpayer bailout of Wall Street banks,” and expressed concerns about the $50 billion fund to help finance forced liquidations.
Sen. Richard Shelby (AL), the ranking Republican on the Banking Committee, says the bill:
Reinforces the expectation that the government stands ready to intervene on behalf of large and politically connected financial institutions at the expense of Main Street firms and the American taxpayer. Therefore, the bill institutionalizes ‘too big to fail.’
This is the exact same model that led us to the crisis in the first place, except for one distinct difference. The government bailout is built in from the beginning through the use of taxpayer guarantees.
The American people are being misled. The authors of this bill are telling them that this legislation has been drafted to address the recent financial crisis and that it will ‘tame’ Wall Street. . . behind the veil of anti-Wall Street rhetoric is an unrelenting desire to manage every facet of commerce under the guise of consumer protection.
Many GOP lawmakers noted that a fund to bail out creditors of large firms only encourages them to increase in size. This is similar to what happened with Fannie Mae and Freddie Mac. They were viewed as being protected by the government.
Other lawmakers are asking why the bill is being passed before Congress receives recommendations from the Presidents commission studying what caused the September 2008 meltdown of the financial system.
What Has Been The Reaction to Brown’s Decision?
Senator John McCain (R-AZ) is one of many prominent GOP leaders who have expressed disappointment with Brown. Among the comments from Brown’s constituents were:
- Dennis Bolduc: “Scott, you are just another RINO. I supported your campaign and I now regret it. I wish I had my $ 100.00 donation back.”
- Bobby Girard: “The Senator had my support until this vote. Being a moderate Repblican should have nothing to do with voting for this particular bill. I am disappointed that thanks to the Senator this huge intrusion of government will become part of our lives.”
- Tom Kippenberger: “Senator Brown, how can you approve of the sweeping power in the Financial Reform Bill without demanding inclusion of Freddie Mac and Fannie Mae in the regulatory language? You know that these two entities were instramental in creating the mess we are currently in. You deceived the good people of Massachusetts into believing that you would be a bulwark against big government.”
- Michael Lynn: “Scott, I do not believe you read the bill (I did). If you had, you would have found many items that are very objectionable. If you vote for this bill, you will have taken a drastically wrong turn. I donated to your election, but I will donate twice as much to your primary opponent the next time around!”
Why Was The Amendment to Audit The Federal Reserve Stripped From The Bill?
The House and Senate conferees voted to strip out language to have the General Accounting Office (GAO) audit the Federal Reserve Board. Even the Senate sponsor of the amendment, Bernie Sanders (D-VT), went along with the deletion.
The audit the fed amendment had over 300 co-sponsors in the House, but the Chairman of the Senate Banking Committee, Chris Dodd (D-CT), said the legislation was not needed and over 100 audits of the Fed had already occurred.
Chairman Dodd says Fed branches are audited annually two ways: an internal audit by permanent staff and an audit by an outside CPA firm. Dodd says the GAO already has the authority to audit the Fed, but they are not permitted to make monetary judgments. The GAO is also not permitted access to decisions the Fed makes concerning foreign central banks. This limit was set by Congress to keep the Fed independent of politics.