Financial reform deal clears House, Iowans split on party lines

The House of Representatives approved what’s likely to be the final version of financial reform yesterday, on a mostly party-line vote of 237 to 192 (roll call). Iowa Democrats Bruce Braley (IA-01), Dave Loebsack (IA-02) and Leonard Boswell (IA-03) voted for the compromise that emerged from a House-Senate conference committee. They had also voted for the original House version last December. Republicans Tom Latham (IA-04) and Steve King (IA-05) voted against the new regulations on the financial sector. The Senate will take up this bill after senators return from the July 4 recess on July 12.

I haven’t blogged much about financial reform because so many important provisions didn’t make it into the original House bill and/or were ditched during the Senate amendment process. Yesterday Democratic Senator Russ Feingold of Wisconsin blasted the “unholy alliance between Washington and Wall Street”:

I cosponsored a number of critical amendments during Senate consideration of the bill including a Cantwell-McCain amendment to restore Glass-Steagall safeguards, Senator Dorgan’s amendment that addressed the problem of “too big to fail” financial institutions, and another “too big to fail” reform offered by Senators Brown and Kaufman that proposed strict limits on the size of those institutions. Each of those amendments would have improved the bill significantly, and each of them either failed or was blocked from even getting a vote.

After that, it wasn’t a close call for me. It would be a huge mistake to pass a bill that purports to re-regulate the financial industry but is simply too weak to protect people from the recklessness of Wall Street. […]

Since the Senate bill passed, I have had a number of conversations with key members of the administration, Senate leadership and the conference committee that drafted the final bill. Unfortunately, not once has anyone suggested in those conversations the possibility of strengthening the bill to address my concerns and win my support. People want my vote, but they want it for a bill that, while including some positive provisions, has Wall Street’s fingerprints all over it.

In fact, reports indicate that the administration and conference leaders have gone to significant lengths to avoid making the bill stronger. Rather than discussing with me ways to strengthen the bill, for example, they chose to eliminate a levy that was to be imposed on the largest banks and hedge funds in order to obtain the vote of members who prefer a weaker bill. Nothing could be more revealing of the true position of those who are crafting this legislation. They had a choice between pursuing a weaker bill or a stronger one.

While we’re on the subject of those conference talks, which catered to a handful of New England Republicans, here’s a textbook case of Republicans negotiating in bad faith:

This week, Democrats sought to confirm the support of Sen. Scott Brown (R) of Massachusetts, who threatened to vote against the bill if it contained $19 billion in new fees on large banks and hedge funds. House and Senate conferees reconvened to remove that provision, but on Wednesday Senator Brown didn’t commit his vote. He said he plans to evaluate the bill over Congress’s week-long July 4 recess.

During the past few weeks David Waldman wrote an excellent series of posts on the conference process and mechanics. Political junkies should take a look, because this won’t be the last important bill hammered out by a conference committee.

As with health insurance reform, the Wall Street reform bill contains a bunch of good provisions. Chris Bowers lists many of them here. Representatives Braley, Loebsack and Boswell also highlighted steps forward in statements I have posted after the jump. On balance, it’s better for this bill to pass than for nothing to pass. But like health insurance reform, the Wall Street reform bill isn’t going to solve the big systemic problems it was supposed to solve. It’s disappointing that large Democratic majorities in Congress couldn’t produce a better bill than this one, and it’s yet another sign we need filibuster reform in the Senate.

Another parallel between health insurance reform and financial reform is that Republican talking points against it are dishonest.

Share any relevant thoughts in this thread.

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Harkin will help hash out financial reform compromise

Senator Tom Harkin is among 13 senators (eight from the Banking Committee, five from the Agriculture Committee) named to the conference committee that will reconcile differences between the financial reform bills approved by the House last December and the Senate last week. The House will also have 13 representatives on the conference committee. For lists of the key differences between the bills, see Pat Garofalo’s Wonk Room chart and this post by David Dayen. Harkin’s office released this statement on Tuesday:

“Over the last year, Wall Street has repeatedly tried to kill this reform with hundreds of lobbyists and millions of dollars in ads. From my seat at the table, I look forward to ensuring that effort will have been in vain,” Senator Harkin said. “I plan to do everything in my power to preserve the bill’s integrity, strengthen its consumer protections, and stop the reckless financial wheeling and dealing that destabilized our economy and threw millions of Americans out of work. And, given the dangers they pose if not properly regulated, I plan to focus on preserving the key reforms in the Senate-passed derivatives portion of the bill. The Restoring American Financial Stability Act is a step in the right direction, and I look forward to improving it in conference.”

He’ll have his work cut out for him if he wants to preserve the Senate language on derivatives. Dayen wrote last week,

Everyone expects the 716 provision, which forces the mega-banks to spin off their swaps trading desks, to be excised in conference. But Michael Greenberger believes something like it will be retained. The House’s derivatives piece is a mess and nearly useless, but [conference committee chairman] Barney Frank has admitted a mistake on that front, and wants to preserve strong rules against derivatives, like in the Senate bill.

The smart money is on the conference committee dropping the strong derivatives language after the Arkansas Democratic primary runoff election on June 8. Until then, corporate hack Senator Blanche Lincoln needs to be able to brag about standing up to Wall Street lobbyists.

Here’s another battle Harkin should fight during the conference negotiations. On Monday the Senate passed a non-binding instruction to the conference committee supporting “a special exemption to shield automobile dealers from the oversight of a new Bureau of Consumer Financial Protection.” The House bill already contains that exemption. Harkin was among the 30 senators who voted against that instruction, while Republican Chuck Grassley was among the 60 who voted to limit the oversight of the new consumer protection unit. Of the 13 senators named to the conference committee, six voted against the instruction on automobile dealers, four voted for it, and three did not vote (roll call).

According to the White House blog,

The President has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections.  The fact is, auto dealer-lending is an $850 billion industry, which is larger than the entire credit card industry and they make nearly 80 percent of the automobile loans in our country.

Is there any question that these lenders should be subject to the same standards as any local or community bank that provides loans?

Auto dealer-lenders sell auto loans to working families every single day, and while most dealers are no doubt above board, some cannot resist the bigger profits that come from inflating rates, hiding fees, and tacking on over-priced add-ons.

In this kind of situation, President George W. Bush would make his demands clear and tell members of Congress to send him “a bill I can sign.” We’ll see how far President Obama is willing to go to keep consumer protection provisions in the Wall Street reform bill.  

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Senate passes financial reform; Grassley tries to have it both ways

The U.S. Senate passed the Wall Street reform bill today by a 59 to 39 vote (roll call here). The vote was mostly along party lines, but Democrats Russ Feingold of Wisconsin and Maria Cantwell or Washington voted no, while Republicans Olympia Snowe and Susan Collins of Maine, Scott Brown of Massachusetts and Iowa’s own Chuck Grassley voted yes. Earlier today, a cloture motion to end debate on the bill passed 60 to 40. Only three Republicans voted for the cloture motion (Snowe, Collins and Brown). In other words, Grassley voted against letting the bill advance before he voted for it.

Grassley typically wouldn’t be the only conservative Republican voting with a handful of New England moderates. Like Howie Klein, I wonder whether Grassley was concerned about this bill becoming an election issue. Roxanne Conlin’s campaign blasted Grassley yesterday for joining the Republican filibuster of the bill.

The financial reform now goes to a formal conference committee to reconcile differences between the House and Senate versions. Annie Lowrey discussed that process and some of the contentious issues here. I’m not hopeful about the final product.

Lots of amendments to more strongly regulate the financial industry bill didn’t get a vote in the Senate, including Tom Harkin’s proposed limit on ATM fees. Jeff Merkley of Oregon and Carl Levin of Michigan were unable to get a vote on their amendment to reinstate the “Volcker rule” (banning proprietary trading by banks). There was a small silver lining in that opposition to Merkley-Levin scuttled a horrible idea. Earlier this week Merkley and Levin attached their amendment to a terrible Republican amendment, which would “[exempt] auto dealers from new consumer protection laws, even though auto loans are the biggest instances of financial malfeasance against consumers, especially military personnel.” Today Senator Sam Brownback of Kansas withdrew his auto dealer amendment in order to prevent Merkley-Levin from getting a vote.

UPDATE: Statements from Harkin, Grassley and Conlin are after the jump. Harkin and Grassley both called the bill “a step in the right direction” even as they lamented its flaws. Harkin lamented that several specific proposals were not adopted or considered, while Grassley called attention to his amendments that became part of the bill. Conlin praised Grassley’s vote for the reform bill and claimed that grassroots efforts “turned up the heat” on Grassley, prompting him to reverse “his five previous votes to block debate on Wall Street reform.”

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Financial reform update (not good news)

The massive oil spill in the Gulf of Mexico and the many primary elections this month have drawn much of the media’s attention away from the Senate debate on financial reform. That’s too bad, because this bill will affect the future stability of our financial system and the ability of financial institutions to fleece consumers. I’ve been catching up with David Dayen’s superb coverage of the financial reform debate, and most of the news isn’t encouraging.

Senate Republicans voted several times in early May to block the bill from coming up for debate, but they soon decided that was not a viable strategy. In the early days of Senate debate, some decent amendments were adopted to strengthen the bill. For example, one amendment sponsored by Jeff Merkley of Oregon and Amy Klobuchar of Minnesota, which passed last week, would ban some deceptive practices by mortgage lenders.

This week Republicans have been trying to “run out the clock” on more strengthening amendments. By denying unanimous consent to bring these amendments to a vote, they have been able to keep the Senate from voting on an amendment by Byron Dorgan of North Dakota, which would ban naked credit default swaps. Republicans have also blocked a vote on Tom Harkin’s amendment to cap ATM fees at 50 cents. In addition, a measure backed by Merkley and Carl Levin of Michigan, which would impose the so-called “Volcker rule,” has been denied a vote. Merkley-Levin “would ban proprietary trading at banks and require the Federal Reserve to impose tougher capital requirements on large non-banks that engage in the same type of trading”. I have a sense of deja vu reading about the Merkley-Levin amendment; like the public health insurance option, Merkley-Levin has the stated support of the White House and Senate Majority Leader Harry Reid. And as with the public option, these Democrats won’t do what’s necessary to get Merkley-Levin into the bill.

Meanwhile, many Senate Democrats are doing Wall Street’s bidding by watering down key provisions of the financial reform. Most of the Democratic Senate caucus backed an amendment from Tom Carper of Delaware, which “would block class-action lawsuits by state Attorneys General against national banks” and “would allow the Office of the Comptroller of the Currency to pre-empt regulation at the state level of consumer financial protection laws.” Chris Dodd of Connecticut got an amendment through last night that eliminates real derivatives reform from this bill. Now, instead of forcing some large banks to spin off their businesses in trading derivatives, Dodd’s amendment delays that move for two years so the issue can be further studied.

Dayen concludes, “Overall, we have a bill that got less bad through the Senate process, but is generally as mediocre as the House’s version, better in some ways, worse in others. And there’s a whole conference committee to go.” Looks like we’ll be stuck with a bill that only gives the appearance of solving key problems, as opposed to a bill that would solve the key problems.

One point worth noting: Senator Chuck Grassley joined Republican efforts to block the financial reform bill earlier this month, but during the debate he has voted for some regulations that most Republicans opposed. For instance, he voted for the stronger language on regulating derivatives trading when it came up in the Senate Agriculture Committee. He was also one of a handful of Republicans to vote for the Merkley-Klobuchar amendment on lending standards. Grassley said recently that there’s a lot of anti-incumbent sentiment this year, and I think he is trying to compensate for his long and consistent record of standing up for Wall Street interests. Analysts outside Iowa agree that Grassley’s re-election contest is looking more competitive than it did last year (though Grassley is still favored).

Share any relevant thoughts in this thread.

WEDNESDAY AFTERNOON UPDATE: Dodd withdrew his derivatives amendment today, Merkley and Levin are trying a new tactic to get their amendment considered, and Reid’s cloture vote failed today, 57-42, despite two Republicans yes votes (Olympia Snowe and Susan Collins of Maine). Reid voted no at the last minute so that he could bring up the matter again tomorrow. Two other Democrats voted no: Russ Feingold of Wisconsin and Maria Cantwell of Washington. Like several other Senate progressives, Feingold wants votes on more strengthening amendments, and Cantwell isn’t happy with “a loophole in the derivatives piece”.  

Fed chairman Bernanke confirmed for second term

The Senate voted to confirm Ben Bernanke as chairman of the Federal Reserve today, but it was hardly a ringing endorsement:

The 70 to 30 vote was the thinnest approval ever extended to a chairman in the central bank’s 96-year history.

The confirmation was a victory for President Obama, who had called Mr. Bernanke an architect of the recovery, but also signaled the extent to which the Fed, once little known to the public, has become the object of populist outrage over high unemployment and Wall Street bailouts.

In several hours of debate, senators said the Fed had abetted, then ignored, the housing and credit bubbles and allowed banks to keep dangerously low capital reserves and to make reckless lending decisions that ruined consumers. Some even blamed Mr. Bernanke for the falling dollar and questioned his commitment to free enterprise.

In contrast, Mr. Bernanke’s supporters were muted. Like a mantra, they said that the Fed had made mistakes but that Mr. Bernanke had helped save the economy from a far worse recession.

Eleven Democrats, 18 Republicans and independent Bernie Sanders voted against confirming Bernanke (roll call here).

Senators of both parties who opposed Bernanke said his monetary policy and poor oversight contributed to the financial meltdown of 2008. Various Democrats who voted against Bernanke said he had been too beholden to Wall Street interests.

I still think it was a mistake for Obama to nominate Bernanke for another term, but let’s hope the Fed chairman our mild-mannered economic overlord improves on the job.

UPDATE: MIT economist Simon Johnson argues that Bernanke’s reappointment was “a colossal failure of governance.” Worth a read.

SECOND UPDATE: Bleeding Heartland user ragbrai08 notes that seven senators voted for cloture (allowing the Senate to proceed to consider Bernanke’s nomination) before voting against confirming him. Here is the roll call on the cloture vote. The senators who voted for cloture but against Bernanke are Democrats Tom Harkin, Barbara Boxer (CA), Byron Dorgan (ND), Al Franken (MN), Ted Kaufman (DE), and Sheldon Whitehouse (RI), along with Republican George LeMieux (FL).

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Braley outlines Populist Caucus "Blueprint for Recovery"

Representative Bruce Braley advocated a four-point "Blueprint for Recovery" in Politico yesterday. The House Populist Caucus, which Braley formed last year, has endorsed these proposals to "require Wall Street to pay for economic development on Main Street and to pay down our nation’s deficit."

Compensation. We need to change the culture of limitless bonuses by passing the Wall Street Bonus Tax Act (H.R. 4426). America’s middle-class families saw their savings wiped out by Wall Street’s gambling addictions and then watched as their tax dollars went to save troubled banks. The targeted tax would apply only to executives at banks that received Troubled Asset Relief Program funding who took bonuses in excess of $50,000. The Bonus Tax Act would generate billions of dollars of new revenue that would be directed exclusively to reward small businesses that are investing in new jobs.

Speculation. We need to stop excessive and risky speculation on Wall Street by passing the Let Wall Street Pay for the Restoration of Main Street Act (H.R. 4191). This legislation would reinstate a tiny transaction fee on speculative stock transactions by Wall Street traders, creating $150 billion annually in new revenue that would be dedicated to job creation and reducing the deficit.

Job creation. A “jobless recovery” is not a recovery for the middle class. With a national unemployment rate hovering around 10 percent, it’s clear America’s middle-class families are still struggling to make ends meet.

That’s why we need to take the following two-pronged approach to creating good-paying jobs that can’t be outsourced: We need to pass the National Infrastructure Development Bank Act (H.R. 2521), which would establish a wholly owned government corporation to prioritize infrastructure improvement projects that would create good-paying jobs. We also need to pass the Buy American Improvement Act (H.R. 4351) to eliminate loopholes in existing domestic sourcing laws and ensure that taxpayer money is used to purchase American-made products and support American jobs whenever possible.

Click here for more details on the Wall Street transaction fees the Populist Caucus supports. The idea is worthwhile, but I am skeptical that the current economic team in the Obama administration would get behind it.

I’m not clear on why a new government corporation on infrastructure projects needs to be created (as opposed to just appropriating more funds for existing agencies to spend on high-speed rail, affordable housing or other infrastructure needs). I asked Braley’s office for comment on that part of the blueprint and received this reply:

The Populist Caucus believes we need a National Infrastructure Bank (NIB) now to invest in merit-based infrastructure projects-both traditional and technological-by leveraging private capital. In recent years, the private sector has raised more than $100 billion in dedicated infrastructure funds, but most of that money is being invested overseas.  We need an NIB to attract those funds into a U.S. market for infrastructure development.

It’s notable that the Populist Caucus is not backing broader populist measures, such as tax hikes for corporations and the top 1 percent of individual earners. Then again, Braley’s caucus prepared and approved this “blueprint” before Oregon residents approved two tax-raising ballot initiatives this week.

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