(The Senate Banking Committee passes the financial reform measure, 13-10, along party lines.)
TheStreet) -- Congress is wasting no time in taking on financial reform now that health care is out of the way, but passing a meaningful bill may be nearly as difficult.
The Obama administration made clear that financial reform is the next priority, and the Senate Banking Committee voted in favor of a regulatory overhaul proposal on Monday, just hours after a historic
health care reform bill
passed. The vote was 13-10, along party lines.
"The test we face is whether we enact real reforms that provide strong protection for consumers, strong constraints on risk taking by large institutions, and strong tools to protect the economy and taxpayers from future crises," Treasury Secretary Tim Geithner said in a prepared statement. "We will not accept a bill that does not meet that test."
But the administration's main health-care agenda inched by in a 219-to-212 vote, with nary a Republican "yea." The opposition is digging in its heels for a fight on financial reform as well. Republicans are ready to introduce hundreds of amendments that would water down a proposal from Sen. Chris Dodd (D., Conn.), who heads the banking committee. Dodd took the unusual step of going rogue to draft his own bill after weeks of terse negotiations that went nowhere fast.
|Sen. Christopher Dodd (D., Conn.)
There's a good chance that the committee and the entire Senate can pass Dodd's proposal, but it still needs to be dovetailed with a House version before the entire Senate can vote. Even if Democrats line up adequate votes to pass the bill, there may not be enough support to overcome procedural hurdles that can be used to delay a vote. They almost certainly have 59 votes; they'd need 60.
Sen. Bob Corker (R., Tenn.), who has been leading the Republican side of negotiations, predicted on Monday that the bill would pass through the banking committee Monday with only Democratic votes; he gave it 90% odds on passing the full Senate in a modified form.
Lobbyists have been pushing to eliminate the most costly and cumbersome provisions, along with those that would take a harsh line on banks' activities. Republicans appear to be toeing that line as well.
For instance, Republicans' proposed amendments would leave more powers with the
rather than the Federal Deposit Insurance Corp., which is seen as a stricter regulator. They would also eliminate a liquidation fund that would place the cost burden on the industry, rather than taxpayers, if crisis struck again. Additionally, provisions that would place regulation on the now-unregulated derivatives market would be erased.
However, Paul Zubulake, a senior analyst at Aite Group who has been focused on the regulatory overhaul, said it will be difficult for Republicans to oppose more regulation. Americans are angry at the financial industry, angry about the bank bailouts, and angry about their own financial situations. They will be taking that anger to the voting booth come November's midterm elections, and while Republicans had a sunny outlook with recent special election wins, the success of health care reform has given Democrats a new sheen.
"Republicans are not going to support anything the president comes up with, but regulation is really a political loser for them," said Zubulake. "It's a slippery slope."
The Dodd proposal is softer than some consumer advocates would like, but hard enough that it lacks full support from Wall Street banks like
(GS - Get Report)
(MS - Get Report)
, as well as those with consumer exposure, like
Bank of America
(JPM - Get Report)
(WFC - Get Report)
(C - Get Report)
. It's worth noting that all of the banking titans that would suffer under tighter regulation were also counterparties made whole by the rescue of
American International Group
(AIG - Get Report)
. Taxpayers, meanwhile, are still awaiting repayment of $70 billion in direct debt from that bailout alone.
On Monday, Geithner urged lawmakers to ignore the opinions of "masters of noble financial innovation" who "brought us this crisis," and pay attention to struggling families and business owners who are still trying to make ends meet. To those consumers, who will be voting in the midterm elections, Geithner also gave a message.
"When you see amendments designed to weaken the basic protections of reform; when you see amendments proposed to exempt certain types of financial firms or financial instruments from rules; ask why we should be protecting those private interests at the expense of the public interest," he said.
-- Written by Lauren Tara LaCapra in New York