According the New Republic, which is documenting the latest fight between the WH and the Banks to get Financial Reform through the Congress, there's several things going on behind the scenes. The banks are offering big concessions in terms of allowing an independent consumer protection agency if derivatives and other areas allow loopholes.
The WH appears to be having none of that.
WH and Big Banks
The banks are expecting reform to water down as the process continues, they want a "bipartisan" bill. We just need to pressure one or two senators, and the WH thinks that they already have them.
In the end, though, the most reliable guide to what’s likely to happen is discerning who has leverage. And, even once you strip away all the rhetoric and the personal narratives, it’s clearly the Democrats who have it. The outcome the industry fears most is that Democrats pass a tough bill on an overwhelmingly partisan vote, isolating Republicans as reflexive defenders of Wall Street. “Everyone in the industry, their line is very simple,” says another administration official. “They want a bipartisan bill.”
According to this same official, the administration doesn’t expect to have trouble finding one or two Republican senators to break a filibuster, even for a hawkish bill. “Frankly there’s a category of [Republican] who is fed up with the party on the issue. They’ve told me so privately,” the official says. “They don’t want to be caught on wrong side of it.” Which means Democrats have the ability to force Wall Street to move their way—not just on the consumer agency, but across the board. The only question is whether they use it.
The industry thinks that the strong language that Dodd placed on Derivatives is just a placeholder language for Blanche Lincoln and Saxby Chambliss' agriculture division. Of course Dodd doesn't have to accept it, and there's more indication that he might not.
And, yet, when you talk to industry representatives, they don’t appear overly troubled by the recent turn of events. Most continue to regard the derivatives provision in Dodd’s bill as a placeholder, which will almost certainly be nudged aside by a compromise negotiated by Democrat Blanche Lincoln and Republican Saxby Chambliss. (The two senators run the Agriculture Committee, which shares jurisdiction over derivatives.) As one lawyer involved in the derivatives industry told me last week, “If they try to push the Dodd bill as currently written on derivatives—it can’t fly.”
What explains the serene confidence? “Derivatives is the tail on this dog,” the lawyer continued. “It’s not what’s going to drive the bill through Congress. Nor is it the filibuster point. Other stuff makes a lot more noise.” The bottom line, this person concluded, is that voters just aren’t very invested in the details of derivatives reform, and so it’s hard to believe the Democrats will be, too: “Words on the page are not that critical to the public. … The public just wants to see something done here. … To some extent, passing a bill [whatever the details] will be marketed as a success.”
If this lawyer for the Banking industry thinks that the public isn't interested in DERIVATIVES, as that may have been the prominent cause of the crisis, they have another thing coming. But what they're counting on, first and foremost is for folks to ignore that part of the legislation and focus on the ban on proprietary trading and the consumer protection agency.
We can't let that happen. If that Lincoln/Chambliss language is abysmal (and all signs are pointing that it will be), then we must fight for the Dodd language or better. Derivatives are a key part of the equation. In fact, any watering down should be alerted to immediately with a call to actually did it.
This is a call to arms. If the WH insists on fighting for these reforms, they need to have backup.