Analysis: Dodd retirement may help banking bill
Associated Press Writer
An AP News Analysis
WASHINGTON (AP) – Freed from his liberal base and moneyed donors, Sen. Chris Dodd can now cast himself as the honest broker in negotiations over a massive Wall Street regulation bill.
In deciding Wednesday not to seek re-election and to retire at the end of this year, the five-term Connecticut Democrat, who is chairman of the Senate Banking Committee, has the latitude to cut a deal with Republicans without fear of alienating liberal voters, according to political strategists from both parties and financial sector lobbyists.
At the same time, his decision also dilutes the influence of financial sector executives and hedge fund managers who have regularly filled Dodd’s campaign treasury.
That means President Barack Obama might see his proposed independent consumer protection agency significantly altered in a compromise. Dodd might also stand tough for requirements that banks put more of their money at risk when they make loans and that regulators have more control over previously hidden financial transactions.
“He can say, ‘This is a good idea, I don’t have to worry whether this is coming from the left or the right, and don’t worry whether it’s going to gain me 10 more votes or lose me 25 more votes,”‘ said former Democratic Sen. John Breaux of Louisiana, a dealmaker during his Senate days and now a lobbyist with financial services clients.
Dodd still has to negotiate tough Senate politics and seek common ground with Sen. Richard Shelby of Alabama, the Banking Committee’s top Republican. But it will be harder for his critics – on the left and the right – to deride him as a populist panderer one day and a water carrier for Wall Street the next.
“The political motivations associated with Chairman Dodd’s re-election are now gone from the regulatory process,” said Scott Talbott, senior lobbyist for the Financial Services Roundtable, which represents some of the nation’s largest financial institutions.
But consumer activists also expressed hope that an unbeholden Dodd would continue to push tough consumer protections and an independent agency to regulate and enforce consumer lending, despite organized opposition from the financial industry.
“We’re hopeful it clears his decks to focus like a laser beam on the real problem of helping Main Street get out from under the mess Wall Street left us in,” said Ed Mierzwinski, program director for the U.S. Public Interest Research Group.
Dodd did not specifically address the task ahead during his announcement Wednesday, except to say, “We have important work to do.”
His spokeswoman, Kirstin Brost, elaborated: “Dodd is committed to continue working in a bipartisan fashion to pass strong financial reform this year.”
Democrats in Congress and in the lobbying sector also pointed out that Dodd’s retirement gives Republicans less of a reason to deny him a legislative accomplishment. “Now it doesn’t matter because he’s not the candidate,” Breaux said.
Among the issues in play as the bill gets assembled are consumer protections; who should fall under new regulations on the trading of exotic financial instruments, such as derivatives; and how to dismantle large, failing firms without taxpayer bailouts. Dodd already has strayed from Obama’s plan by calling for a weaker Federal Reserve. Compromises on consumer protections and derivatives also would fall short of Obama’s plans.
Last month, Dodd and Shelby issued a joint statement saying bipartisan negotiations have resulted in “meaningful progress.”
It was a big step from November, when Shelby and other Republicans on the committee reacted dismissively to a draft of Dodd’s bill. With even Democrats expressing misgivings, Dodd started anew, assigning bipartisan teams to address various components of the complex legislation.
Still, an independent consumer finance protection agency is Shelby’s main sticking point and could end up a casualty in any compromise. Under the House bill and in Dodd’s original proposal, banking regulators would lose their consumer protection powers and would be consolidated in a single entity that would write and enforce rules governing lending and credit cards.
One idea making the rounds in the committee would create an agency or a council that would only have rule-writing authority, with enforcement remaining in the hands of bank regulators. “That’s sort of a middle ground that makes sense,” Breaux said.
Consumer advocates are vigorously opposing that idea.
“We don’t think that the financial regulators who failed so dramatically to spot the financial problems that brought our economy to its knees should be in charge of consumer protections,” said Travis Plunkett, legislative director for the Consumer Federation of America.
But for Dodd, and even Obama, it might be the price for victory.
EDITOR’S NOTE – Jim Kuhnhenn covers economics and politics for The Associated Press.