The passage of Lincoln's derivatives bill, with the surprise support of Grassley, and counterintuitively watered down by a handful of Dem amendments, gets the Senate closer to a done deal.
Lincoln's language on derivatives still has to be merged with the Dodd bill, and could be changed by Dodd before it's included in the the manager's amendment. Grassley has made it clear that his vote for the Lincoln bill doesn't mean he'll vote for the legislation.
On a conference call with Iowa reporters after the vote, Grassley said, "The Lincoln bill is an important step in the right direction."
"My vote today for this reform doesn't mean that I'll be able to support the larger financial reform bill on the Senate floor. The derivatives piece is significant but that larger bill has a number of flaws that need to be resolved before I support it."
But that vote, along with Bob Corker's ongoing effort to push back against Mitch McConnell's "permanent bailout" rhetoric, increases the likelihood that at least a few Republicans will allow the bill to go forward. Attention now is going to turn to amendments, and one of the strongest comes from Sens. Sherrod Brown, Ted Kaufman, Bob Casey and Sheldon Whitehouse. The Safe Banking Act of 2010 has been introduced as a stand-alone, and will also be offered as an amendment to the larger bill.
Stressing the need for more competition among smaller banks and increased business lending, the senators believe that the largest financial institutions present too much risk to our economy to keep them around. They have the support of the Main Street Alliance, a group of progressive-leaning small business owners who have advocated for strong financial reform and set themselves up in opposition to the Chamber of Commerce.
The bill's central points:
- Imposing a strict 10 percent cap on any bank-holding-company’s share of the United States’ total insured deposits
- Reducing the maximum amount of non-deposit liabilities at financial institutions (to 2 percent of United States GDP for banks, and 3 percent of GDP for non-bank institutions)
- Setting into law a 6 percent leverage limit for bank-holding companies and selected non-bank financial institutions
These steps would require several of the largest banks to, in effect, break themselves up to come in under the limits that this law would create. While most of the existing legislation in the House and Senate contains gestures toward these ideas, this is the first time they've been proposed as statutory limits, something called for by a number of public figures, including several Midwestern regional Federal Reserve presidents and former Fed Chair Paul Volcker.
This amendment would definitely put some real teeth into the bill.