This afternoon, the Senate voted to end debate on Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill, 60 to 40. Today or tomorrow, the Senate will take a final vote on the bill, which will almost certainly pass. But what happens until then? After then? What about all those amendments? Here is a rundown of the process and remaining questions.
First, Senate Majority Leader Harry Reid (D-Nev.) will allow votes on “germane” amendments to the bill. At this point, all amendments that might come up for a vote are technically “germane,” in that they substantively alter the bill at hand rather than, say, funding a technical center college campus in rural Wyoming. But it is the Senate leadership’s discretion to choose the amendments allowed an up-or-down vote.
Right now, Reid has indicated he *will *allow a vote on Sen. Sam Brownback’s (R-Kans.) amendment barring Consumer Financial Protection Agency from enforcing rules on autodealers making car loans. He will also allow a vote on a secondary amendment attached to Brownback’s, Sens. Jeff Merkley (D-Ore.) and Carl Levin’s (D-Mich.) provision on the Volcker Rule, barring banks from risky proprietary trading. Right now, the fates of those two amendments are intertwined. If Brownback is not passed, no dice for Merkley-Levin. Republicans will attempt to table the Merkley-Levin secondary amendment. Merkley and Levin will attempt to get their amendment considered by itself.
Other senators might lobby to have their amendments come up for a vote — notably Sen. Susan Collins (R-Maine), who wants to strengthen capital requirements, and Sen. Maria Cantwell (D-Wash.), who wants to fix holes in Sen. Blanche Lincoln’s (D-Ark.) derivatives language and has offered an amendment with Sen. John McCain (R-Ariz.) to impose Glass-Steagall-type provisions barring combined commercial and investment banks.** But, right now at least, Senate staffers say Brownback and Merkley-Levin will be the *only *amendments getting an up-or-down.
Then, today or tomorrow, the Senate will vote on and presumably approve the Dodd bill. Next up: conference committee.
The conference committee is comprised of senior members of the committees that worked on the bills. In this case, that means the House Financial Services Committee, the Senate Banking Committee and the Senate Agriculture Committee — expect to see Rep. Barney Frank (D-Mass.), Rep. Spencer Bachus (R-Ala.), Sen. Richard Shelby (R-Ala.) and Sen. Saxby Chambliss (R-Ga.) as well as Dodd, Lincoln and others. The committee will prepare a “conference report,” splitting the difference between the House and Senate bills; the House and Senate approve the report and then, once signed by President Barack Obama, the bill becomes law. Frank, the head of the House Financial Services Committee, says he expects that done by July 4.
What can the conference committee change? It cannot introduce any new language to the bill. It can only adopt either House or Senate measures, or split the difference between the two. (That said, if the bill needed new language coming out of conference committee, there are ways to tack it on.)
What are the major issues pending?
**The Volcker Rule: **The current Dodd bill requires the new Financial Stability Oversight Council to study firms’ proprietary trading operations and to create new rules prohibiting the practice. It says banks should not invest in or house hedge funds either. The House bill has no such language. The Merkley-Levin amendment would bolster the Dodd language — immediately barring federally insured banking institutions (think: Main Street banks) from engaging in speculative trading and requiring non-banking institutions (think: Goldman Sachs) to post appropriate collateral to cover their risky trades. If the Merkley-Levin amendment does not make it into the Dodd bill, there is no way to bolster the Dodd language.
Derivatives trading: Derivatives remain a major question. The House bill is very weak on requiring banks to put derivatives trades through clearinghouses. The Lincoln language in the Dodd bill is strong — forcing financial firms to spin off their derivatives trading operations into separate subsidiaries. The Obama administration opposes the Lincoln language, as do Dodd, Treasury Secretary Timothy Geithner, Wall Street and a bevy of others. The best guess right now is that the provision will be watered down, though it is not clear how.
One problem: If the Cantwell amendment fixing the loopholes in Lincoln’s language is not voted on (and it looks like it won’t be), the conference committee cannot add the language in. The House and Senate would have to vote on the fix separately, or there would have to be some procedural maneuvering to figure out a patch.
**Capital requirements: **The House bill has a hard 15:1 leverage requirement that the conference committee could adopt. The Dodd bill gives regulators the authority to set capital and leverage requirements. Progressives should be looking for hard numbers in the conference committee report.
** Update: A clarification. The McCain-Cantwell amendment imposing Glass-Steagall-type requirements was declared not germane to the Dodd bill, meaning it can no longer be brought up as an amendment. As I understand it, it is not technically germane because it modifies another act rather than changing the substance of the Dodd bill itself.
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