Why Is Grassley Waffling On Financial Reform?

When it returns from its July 4th recess, the Senate plans to take up the financial regulatory reform conference report, which has already been passed by the House. The death of Sen. Robert Byrd (D-WV) has left the Democrats with 58 votes, and Sen. Russ Feingold (D-WI) has said that he will vote against the bill, meaning that three Republican votes are necessary to invoke cloture and move the bill to a final vote.

Sen. Susan Collins (R-ME) has said that she is “inclined” toward supporting the bill, while both Sens. Olympia Snower (R-ME) and Scott Brown (R-MA) are supposedly using the recess to study the bill. All three voted for the Senate’s original version of the bill

But one more Republican — Sen. Chuck Grassley (R-IA) — voted for the bill in the Senate, and he is now waffling on whether or not he will support the conference report:

Sen. Charles Grassley is “very concerned” about a provision in the financial overhaul bill designed to pay for the legislation, an aide said Thursday…Mr. Grassley’s spokeswoman, Jill Kozeny, said he is “very concerned about the precedent of using the FDIC fees both as a credit to the FDIC and to count as [a way to pay for the bill], and it’s his view that TARP money ought to be used to pay down the debt and not for more spending.”

Remember, the conference committee that reconciled the House and Senate versions of the bill reopened its deliberations in order to restructure this particular fee — which used to be a straight tax on the biggest banks — following objections from Brown, Snowe, and Collins.

I would have preferred the straight fee, instead of the now roundabout way in which the bill is paid for, but I’m curious as to where Grassley would prefer to raise this money. Does he simply want to add the cost of the bill to the deficit? Or does he want to cut some services somewhere, thereby forcing American citizens to pay for the implementation of a bill correcting Wall Street’s ills.

The Iowa Bankers Association is also reportedly trying to convince Grassley to vote against the bill, which is puzzling since Iowa’s banking market is dominated by smaller institutions that should gain market share once the bill goes into effect, as Wall Street’s biggest players are cut down to size a bit.

In fact, Camden Fine, head of the Independent Community Bankers of America, wrote in a private email to his organization that small banks would be “turning the gun on themselves” if they work with Wall Street to defeat financial reform. “Do you really think Wall Street mega firms give a rat’s ass about small banks? Hell no,” he wrote. “They only care about the credibility small banks can wield on Capitol Hill to get them out from under this rock.” Grassley would do well to heed Fine’s advice.