Dodd switches tactics on reform bill in search of elusive bipartisanship

Exclusive analysis for FinReg21 by Darrell Delamaide

Remember the Gang of Six – that group of three Democratic and three Republican senators that were going to hammer out a bipartisan bill on healthcare reform last summer?

By the time that gang finished its fruitless dialogue, two of its Republican members – Charles Grassley of Iowa and Mike Enzi of Wyoming – were openly disparaging the process as a delaying tactic.

In the end, majority leader Harry Reid of Nevada had to grovel before a couple of senators in the Democratic caucus to get his 60 votes to override Republican opposition on healthcare reform. So much for that effort at bipartisanship.

Now Senate Banking chairman Chris Dodd has formed his own Gang of Eight to find a bipartisan solution to financial regulatory reform – though what he hopes to achieve in view of the earlier failed effort is hard to fathom.

The Democratic chairman from Connecticut has paired up Democrats and Republicans to discuss four major issues in regulatory reform:

· Dodd himself will work with ranking member Richard Shelby of Alabama on how to reduce the number of bank regulatory agencies, as well as the thorny issue of consumer protection.

· Democrat Mark Warner of Virginia and Republican Bob Corker of Tennessee are examining the issue of how best to handle large financial firms that are too big to fail, as well as possible regulation of nonbank financial firms, such as mutual funds and hedge funds.

· Democrat Chuck Schumer of New York and Republican Mike Crapo of Idaho are looking at issues of corporate governance and compensation.

· Democrat Jack Reed of Rhode Island and Republican Judd Gregg of New Hampshire are tackling derivatives regulation as well as the credit rating agencies.

Since Shelby is on the record as opposing creation of a new Consumer Finance Protection Agency, as called for by the administration and in the bill passed by the House, it’s hard to see how he and Dodd will find a middle ground that will result in a new agency with any real power.

Corker and Gregg were two of four Republicans on the Banking Committee, out of 10, who voted last week to approve Ben Bernanke’s nomination to a second term as chairman of the Federal Reserve, showing at least that much bipartisanship (all but one of the 13 Democrats voted in favor of Bernanke). But that’s not much of a sign as to how they will come down on the reform measures.

Dodd says he has to go this route because of Senate rules that require 60 senators to vote in favor of bringing a bill to a vote to avoid a filibuster. This keeps him from following the lead of his House counterpart, Financial Services chairman Barney Frank, who rammed through his encyclopedic reform bill on a strictly partisan vote.

Of course, the Democrats technically have that super-majority of 60 in the Senate, but no guarantee that all 60 will toe the party line.

It was the same excuse used by Senate Finance Committee chairman Max Baucus of Montana in his futile effort to get bipartisan buy-in on healthcare reform.

The tactic allows Dodd, as it did Baucus, to “plant his flag,” as he put it in one interview, but also defer any action for several months. Dodd announced his draft legislation with some fanfare last month, calling for consolidation of all banking regulators into one and supporting the CFPA.

Dodd told the Boston Globe that he is following the example of the late Sen. Ted Kennedy, who famously worked the back rooms of the Senate to wrest compromises from his Republican colleagues. Of course, Kennedy was not usually working on legislation in a Senate where Democrats enjoyed a super-majority, and his successes were not recorded in mammoth packages of controversial reform legislation.

Some commentators have been willing to impute to Shelby a desire to achieve some landmark legislation with his name attached to it. Perhaps that is the case, but it sounds a lot like the kinder things that were said about Grassley when he led healthcare reform down a dead-end alley.

If this were the first such effort to tame controversy with a bipartisan effort, one might give it the benefit of the doubt. But after the debacle of the Gang of Six, voters might feel simply like they are being played by some insincere politicians.

Dodd’s tactic, sure to delay reform legislation by months and perhaps torpedo it altogether, is the latest example of what economist Paul Krugman recently called a Senate that has become “ominously dysfunctional.”

Given how close a thing it was to get healthcare reform through the Senate, how will the upper house be able to deal with financial reform, climate change and other urgent issues, Krugman asked in a recent column.

Good question. The House passed its Wall Street Reform and Consumer Protection Act earlier this month along party lines, with defecting Democrats reducing the winning margin to only 21. With the Congress as polarized as it is now, Dodd’s effort at bipartisanship with his Gang of Eight does not seem a very promising way of getting anything done in the Senate.