However, the Financial Times is reporting that the Volcker rule will “either be dropped or significantly modified in the Senate.” A staffer for Senate Banking Committee Chairman Chris Dodd (D-CT) said the justification for weakening or discarding the limits is simply that Republicans, including banking committee ranking member Sen. Richard Shelby (R-AL), don’t like them, and Dodd wants the bill to be bipartisan:
A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform. “Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan,” the staffer said. “He is not going to risk bipartisan support to make the White House happy.”
There have already been reports that Dodd is thinking of dropping the very necessary Consumer Financial Protection Agency (CFPA) from his proposal, and ditching the Volcker rule would be one more instance of the interests of the banking sector trumping the interest in a secure economy. Plus, Dodd seems to be giving Shelby and the Senate Republicans effective veto power over various aspects of regulatory reform in an effort to drum up some Republican votes, which seems to be a fool’s errand. After all, Shelby said last week that he is perfectly fine doing nothing at all to rein in the banks.
In fact, just about every regulatory reform measure that Democrats have proposed has met with resistance from Republicans, if not outright scorn. Bank tax? No. Consumer Financial Protection Agency? No. Resolution authority? Nope. Breaking up “too big to fail” firms? No. Derivatives regulation? No. Consolidating bank regulators? Nope.
And just take a look at this memo from GOP wordsmith Frank Luntz — last seen teaching Republicans how to obstruct health care reform — which details how to kill regulatory reform outright. As the Huffington Post’s Sam Stein reported, Luntz “urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy,” regardless of the bill’s actual contents.
The most pernicious part of the memo is Luntz’s tip that “frankly, the single best way to kill any legislation is to link it to the Big Bank Bailout.” This, despite the bank bailout and regulatory reform legislation having nothing to do with each other, and the fact that the legislation passed by the House last year puts measures in place that would prevent future bailouts.
When the Volcker rule was first proposed, Rep. Scott Garrett (R-NJ) asked “do you really want to start confining the banks and their ability to make profits?” And that seems to sum up the GOP view — anything less than a system in which the banks are free to wheel and deal to their hearts’ content is unacceptable. So instead of caving and crafting a regulatory reform bill that does nothing to fundamentally secure the financial system, Dodd should just bring a solid bill to the floor and dare Republicans to vote against it.