Under Kanjorski’s proposal, “the power to restructure a company could go to the systemic-risk council and involve the Treasury secretary, with a final decision made by the president.” This goes much further than the legislation proposed by either the administration or House Financial Services Chairman Barney Frank (D-MA).
The bill has already “set off alarms across K Street.” “That was a little unexpected,” one bank lobbyist told The New Republic’s Noam Scheiber. “It sort of…threw people for a loop.” However, Kanjorski has at least piqued the interest of one prominent player in the regulatory reform debate: Senate Banking Committee ranking member Richard Shelby (R-AL):
Senator Richard Shelby, the top Republican on the Senate Banking Committee, said today he liked the idea. “I don’t think anything is too-big-to-fail,” said Shelby, of Alabama. “We ought to be looking at legislation to deal with a bank beforehand if we can, or an institution that would cause systemic risk, to make it stronger, or make it smaller.”
Now, Shelby has already toyed with the Democrats, saying that he might be able to support creating a Consumer Financial Protection Agency (CFPA), only to characterize such a move as “folly and dangerous” when legislation started to move.
However, back in 1999, Shelby was the only Republican who voted against the repeal of the Glass-Steagall Act, which separated investment banking from traditional banking. And with the UK beginning to break up large, bailed-out financial institutions and more and more people talking about enacting some sort of wall between depository and investment banking, this seems like an issue that is not going to go away. For his part, Kanjorski said that he’s “getting some good feedback” on his measure. “Most people are coming up to me and saying we should have done this originally, why didn’t we?” he said.
It’s too soon to tell how this will all shake out, especially since Senate Banking Chairman Chris Dodd (D-CT) has yet to release his version of regulatory reform legislation. But Dodd is already planning to deviate from the House and the administration’s reform vision in significant ways. Will Shelby’s willingness to at least talk about breaking up the big banks push Dodd to go even further? And if he does, will Shelby be able to bring any other Republicans along?