Good thing about financial overhaul: It's not health care

McClatchy NewspapersApril 7, 2010 

WASHINGTON — This year's next big legislative battle — overhauling the nation's financial regulatory system — will involve a different and probably gentler style of politics from the one the capital has seen recently.

Congress will return from a two-week spring recess Monday, and lawmakers are poised to engage in a less partisan process than the brawl over health care was, one that will reflect the public's desire that the government keep a closer eye on Wall Street and banks.

"There's a huge political difference between this and health care," said Douglas Elliott, a former investment banker who's a scholar at the Brookings Institution, a center-left policy research group. "People have a predisposition to try to work together."

The financial crisis that sent the economy into a tailspin in late 2008 may have had a greater impact on more Americans than the health system's woes have. Obstructing efforts to hold financial institutions accountable would be risky in an election year.

Blocking an overhaul could make politicians look as if they're defending Wall Street at a time when "the public views banks and financial institutions as unfavorably as government," said Carroll Doherty of the Pew Research Center for the People & the Press.

A Pew survey in February found that two-thirds of the public had an unfavorable view of major U.S. banks and financial institutions, and 51 percent said the government's 2008 bailout of ailing financial institutions was wrong.

Those concerns cut across party lines.

"I don't know that there are 41 Republican senators stupid enough to filibuster this bill," Elliott said. Cutting off a filibuster — extended Senate debate — requires the votes of 60 of the 100 senators. Democrats command 59 votes.

Adding to the cautious optimism are the key players' histories. Senate Banking Committee Chairman Christopher Dodd, D-Conn., and Sen. Richard Shelby of Alabama, the panel's top Republican, have a long record of working toward consensus.

Dodd almost always enlists a conservative Republican as a partner when he pushes major legislation, and Shelby, who was first elected to the Senate in 1986, was a Democrat until 1994, when he switched parties because of disputes with President Bill Clinton over budget and tax policies.

"He was able to switch with a minimum of disturbance. Republicans and Democrats find they work well with him," said William Stewart, a professor emeritus of political science at the University of Alabama.

Last month, after Dodd got his committee to approve his legislation with virtually no debate, Shelby was characteristically cordial.

"Although I have raised a number of serious concerns, I remain today optimistic that we can over time reach an agreement that will garner broad bipartisan support. I just don't believe we are quite there yet," he said.

Even that committee vote could be read as a calming move, since pushing the bill quickly to the full Senate and avoiding lengthy, partisan committee sparring over amendments probably will save time and preserve the good will that's needed to broker an agreement eventually.

Senate Republican leader Mitch McConnell of Kentucky sent his own signal that he's ready for bipartisan cooperation on this one. "To the extent that we can target (the bill) at 'too big to fail' " — the doctrine that the government must bail out mega-banks lest their collapse endanger the economy — "I think we could potentially get an agreement," he said.

The bill still faces huge hurdles, however. A strong corps of Democrats, including committee leaders in the House of Representatives, wants an independent consumer agency to regulate mortgages and credit cards.

Dodd's plan, while it would create an independent agency, would house it within the Federal Reserve. That's troubling to many consumer advocates, and many insist that it remain outside the Fed. They also don't mind blasting the GOP for being timid about strengthening regulation.

"Bipartisanship is nice, but it cannot be a substitute for action. Not having it cannot prevent us from going forward. So if they don't want to regulate Wall Street, we do. And we will," said House Speaker Nancy Pelosi, D-Calif.

The biggest obstacle could be related to the upcoming elections: a reluctance to alienate big campaign contributors.

"You don't want to make your financial supporters too angry,'' said Gary Jacobson, a professor of political science at the University of California at San Diego.

In the 2008 election cycle, the finance, insurance and real estate sectors gave $476 million to candidates, well above the $341 million they gave in the previous presidential election cycle. In the current election cycle, they've contributed $116 million so far, much more than any other special-interest sectors have.

At the moment, though, most experts and lawmakers are hopeful.

"The outcome isn't certain at this point," said Heather Booth, the executive director of Americans for Financial Reform, a consumer-oriented group. "But this is the best shot we've had in 50 years."

ON THE WEB

Pew survey on public attitudes

Restoring American Financial Stability Act of 2010

Finance, real estate and insurance industry political contributions

MORE FROM MCCLATCHY

Odds are brightening for financial regulation bill to pass

Remember the financial crisis? Senate unveils its fix

Financial regulation bill to be introduced without GOP backing

To ask a question about this story or any economic question, go to McClatchy's economy Q&A

For more McClatchy politics coverage visit Planet Washington

McClatchy Newspapers 2010

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service