ECONOMY The Future Of Financial Regulatory Reform Yesterday, Sen. Chris Dodd (D-CT), the chairman of the Senate Banking Committee, announced that he will be retiring from the Senate at the end of his term. "In the long sweep of American history, there are moments for each elected public servant to step aside and let someone else step up," Dodd said. "This is my moment to step aside." One of the biggest questions that Dodd's announcement provokes is what his departure will mean for the financial regulatory reform legislation that he has been trying to move through the Senate. One "gleeful" financial service lobbyist opined that it would lead Dodd to give in to Republican demands, while Politico's Victoria McGrane wrote that it might compel him to put "it all on the line to get what he wants, bipartisanship be damned." Dodd's retirement also injects an urgency into the regulatory reform debate, as his likeliest successor as chairman is Sen. Tim Johnson (D-SD), a bank-friendly Democrat widely criticized by consumer advocates. As the Wall Street Journal wrote, Dodd's "decision gives Republicans the incentive to draw out the process until after next year's elections when a more business-friendly Democrat could ascend to the banking panel's chairmanship." But some are optimistic about reform's chances now that Dodd does not have to focus on an election. "We're hopeful [his retirement] 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
THE STATE OF THE CFPA: The "key stumbling block" to financial reform passing in the Senate is Republican opposition to the creation of a new Consumer Financial Protection Agency (CFPA), which was included in the reform legislation passed by the House last month. The banking committee's ranking member, Sen. Richard Shelby (R-AL), "has condemned the agency as a burdensome intrusion on business" because "safety and soundness [of banks] should be number one." Sen. Robert Bennett (R-UT) added that "from the Republican point of view, the idea of a separate agency is still anathema." Meanwhile, financial services lobbyists are pushing the Senate to consider a proposal by Rep. Walt Minnick (D-ID) which, instead of creating a CFPA, would create a loose consumer protection council within the existing regulatory framework. Minnick put forth his proposal as an amendment in the House, where it was narrowly defeated. "We've talked to a lot of senators, on both sides of the aisle, who have seen what Walt Minnick has done," said Rob Nichols, president of the Financial Services Forum, which is actively advocating for Minnick's proposal and represents the 18 largest financial institutions in the country. But as CNBC's Becky Quick pointed out, such a council would have "no real teeth in being able to implement anything."
THE ROLE OF THE FED: One area where the banking committee appears to be reaching consensus is on the future regulatory role of the Federal Reserve. Reuters reported that committee members "agree the Fed should be confined to monetary policy and being lender of last resort," and "should not be directly supervising banks." "Over the last number of years when [the Fed] took on consumer-protection responsibility and regulation of bank holding companies, it was an abysmal failure," Dodd said in November. The committee's decision comes days after Federal Reserve Chairman Ben Bernanke delivered a speech in which he called for "better and smarter" regulation "aimed at problems with underwriting practices and lenders' risk management," a role which he would like to see the Fed take on. However, as the Washington Post reported, regulatory failures occurred because the Fed "had joined -- and at times defined -- the mainstream consensus among policymakers that financial innovations had made banking safer." "The Fed has since tried to take a proactive stance on consumer protection, but it's clearly too little too late," wrote Mother Jones' Andy Kroll. "And if history is any example, promises of better regulation and greater scrutiny only fade with time, and it wouldn't be surprising to see the Fed revert back to the way it was before the housing meltdown."
A RETURN TO GLASS-STEAGALL?: Outside of the banking committee, a growing number of economists and elected officials are pushing for the breakup of large, complex financial firms, potentially through a reinstatement of the Glass-Steagall Act, a Depression-era law that separated investment and depository banking. Glass-Steagall was repealed in 1999, and bills have been introduced in both houses of Congress to revive it. "If big Wall Street institutions want to take part in risky transactions, fine. But we should not allow them to do so with federally insured deposits," said Sen. John McCain (R-AZ), who is sponsoring the Senate bill along with Sen. Maria Cantwell (D-WA). This week, Kansas City Fed President Thomas Hoenig said that "dismembering firms is a fair thing to consider," adding that regulators could "carve out" the parts of a financial institution that are taking risks with government backing. Paul Volcker, who who currently heads President Obama's Economic Recovery Advisory Board, has also advocated breaking up firms that are "too-big-to-fail" and creating a wall between investment banking and deposit taking. Even former Citibank CEO Jack Reed, whose lobbying was instrumental in Glass-Steagall's repeal, has concluded that some sort of separation "makes sense." Thus far, the Treasury Department has not been receptive to reexamining Glass-Steagall, with one official saying that it would be akin to "going back to the Walkman."
CIVIL RIGHTS -- CONGRESSIONAL REPUBLICANS TRYING TO TRAMPLE ON D.C.'S RIGHT TO PASS SAME-SEX MARRIAGE LAW: Last month, the Washington, D.C. City Council voted 11 to 2 to legalize same-sex marriage in the District. Mayor Adrian Fenty signed the legislation two days later, saying that "the District, from this day forward, will set the tone for other jurisdictions to follow in creating and open and inclusive city." But 39 Congressional Republican do not want D.C. to be an "open and inclusive" example. The Republicans, including House Minority Leader John Boehner (R-OH), House Minority Whip Eric Cantor (R-VA) and Sen. Jame Inhofe (R-OK) "have filed an amicus brief in D.C. Superior Court calling for a voter referendum on whether to legalize same-sex marriage in the District." The filing states that as "members of the District's ultimate legislative body, [we] are concerned about the extent of the District's delegated legislative authority, the preservation of Congress's constitutional authority, and the interpretation of home rule." Rep. Jason Chaffetz (R-UT), who signed the brief and sits on a subcommittee that oversees the District, has vowed to block same-sex partners from having equal marriage rights in the nation's capital. However, even if the Republicans succeed in forcing a referendum, it is likely they will lose in their struggle against marriage equality. In September, the Washington City Paper reported that a Human Rights Campaign poll conducted in the spring found "upwards of 65 percent support citywide" for same-sex marriage.
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Seven Senate Republicans sent a letter to the White House yesterday, saying that they had "serious reservations" about the nomination of Erroll Southers to lead the Transportation Security Administration. Sen. Tom Coburn (R-OK) also "placed a hold on the nomination, pending the White House response to the senators' questions." Southers' nomination had previously been held up by Sen. Jim DeMint (R-SC). "Some wealthy contributors are shunning the Republican National Committee and donating instead to the other GOP campaign committees or directly to candidates -- in many cases because of discontent with the leadership" of RNC Chairman Michael Steele. "I don't plan to give to the Republican National Committee this cycle, and no other major donor I know is planning to either," RNC member Christine Toretti. Former Alaska governor Sarah Palin is scheduled to headline the first-ever Tea Party Convention in Nashville, TN next month. Several "talk show hosts will kick off the convention with a reception and townhall meeting" on Feb. 4, and tickets are reportedly selling quickly. Other scheduled speakers include Rep. Michele Bachmann (R-MN) and WorldNetDaily founder Joseph Farah. Following a meeting with Democratic leaders yesterday, President Obama "expressed his preference" for a tax on "high-end health insurance plans" that is included in the Senate's health care bill. The tax is not included in the House's version of health care legislation and is expected to be a bitter point of contention between the two chambers. Sen. John Kerry (D-MA) "went after" Republicans yesterday for politicizing the failed Christmas day bombing. "Led by former Vice President Dick Cheney, they have resorted to partisan denunciations that serve no legitimate purpose and have no place in the nation's vital debate over how to fight terrorism," Kerry said. A new report by Afghan Rights Monitor (ARM) has found that three children a day are now dying in the war in Afghanistan. ARM estimates that 1,050 Afghans under the age of 18 were killed last year. The public may be able to "see delayed tapes of the high-profile federal trial on Proposition 8 that begins Monday in San Francisco." "Pending approval by the 9th Circuit Court of Appeals," the judge presiding over the case will "let court cameras capture the trial daily and post the tapes, via YouTube," to the court's website. Yemen's Foreign Minister Abu Bakr al-Qirbi said yesterday that his country's government is opposed to U.S. troops engaging in combat in its country. Al-Qirbi noted that "there is a lot of sensitivity" to the idea of foreign troops in Yemen, and his preference is for logistical support. "Both the percentage and the number of black and Mexican-American law students declined" from 1993 to 2008, a new Columbia Law School study has found. "Even though their scores and grades are improving, and are very close to those of white applicants, African-Americans and Mexican-Americans are increasingly being shut out of law schools," said Columbia professor Conrad Johnson. And finally: The President and First Lady's images are gracing various advertisements these days, including a giant billboard in Times Square. The only problem? The Obamas never endorsed the companies' products or causes. |
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"[I]f I wasn't doing this job, I'd be out there with the tea partiers."
-- RNC chair Michael Steele, 01/05/10
VERSUS
CAVUTO: [T]ea party activist Steve McQueen saying, "Not so fast Mr. Steele." ... Steve, you would say "not quite," right?
MCQUEEN: Not quite, Neil. ... [T]he GOP is currently on probation with the American people.
-- Illinois Tea Party co-founder Steve McQueen, 01/06/10
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