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The Significance of Last Night’s Vote on Finance Reform

Following last night’s speedy passage of sweeping finance reforms in the Senate Banking Committee, much of the focus has been on the Republicans’ strategy to take the fight over the bill to the Senate floor, rather than pushing amendments during what was supposed to have been a long-drawn committee markup.

Overlooked, though, has been the fact that every panel Democrat voted for the bill. That might not sound unusual, but the Senate Banking Committee is home to Sen. Tim Johnson, the South Dakota Democrat with a long record of protecting the finance industry in the face of reforms. (South Dakota is a banking hub.) Indeed, last year Johnson opposed even the Democrats’ credit card reforms, a bill seen as the low-hanging fruit of finance reforms (if only because the banks were wildly unpopular at the time and so many voters have direct experience with the tricks used by credit card companies).

No matter. Johnson said at the time that the bill went “too far in prohibiting lenders from adjusting prices to account for increased risk.”

On the much more comprehensive bill passed by the Banking panel yesterday, though, Johnson indicated a change of tune, saying he was “pleased” Congress is moving to “modernize” the nation’s finance system. His vote in favor of the reforms, which are sponsored by Banking Chairman Chris Dodd (D-Conn.), provided the proof.

There’s still a long way to go. Indeed, more than 400 amendments have been filed against the bill, many of which would protect the banks at the expense of consumer protection. Still, some observers on Capitol Hill are saying today that Dodd’s ability to rally all the Democrats behind the bill is no small achievement — that Senate Democrats, for once, have shown some party discipline.

Johnson’s entire statement:

I am pleased that we are moving forward legislation that will create better regulation and protect consumers and Main Street small businesses. This has been a long process, and I commend the Chairman for working hard to find common ground to target the causes of the financial crisis, and reform and modernize our nation’s financial regulatory system.

The bill incorporates good ideas from both sides of the aisle. It creates a systemic risk council to act as an early warning system, monitoring our economy and financial institutions for trouble. It ends government bailouts by addressing the gaps that existed when large nonbank financial companies, like AIG and Lehman, failed and there were no tools to unwind them. By ending “too big to fail,” the American taxpayer will never again be forced to shoulder the costs of risk taken on Wall Street. It will also finally regulate exotic products like credit default swaps, and hold Wall Street companies accountable for the risks they take that put consumers at risk.

Our efforts at bipartisanship have led us to find good solutions to protect small community banks and credit unions. We have also found common ground to protect consumers, provide uniform rules regarding consumer protection, and level the playing field for banks and nonbanks.

This bill is not perfect, and there are certainly items each of us on this Committee would like to see improved as we go to the floor. I am hopeful that bipartisan conversations will continue on these issues in coming weeks as the bill moves through the full Senate.

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