One question bouncing around news outlets today is what Senate Banking Committee Chairman Chris Dodd’s (D-CT) retirement means for the regulatory reform effort. Does it make him more or less likely to compromise on key parts of the bill, including the Consumer Financial Protection Agency (CFPA)?
It’s hard to discern whether Dodd’s retirement will lead him to give in on a host of issues (as one “gleeful” financial services lobbyist told Politico it would) or compel him to put “it all on the line to get what he wants, bipartisanship be damned.”
But one thing is for certain: Dodd’s retirement means that the regulatory reform effort needs to wrap up this year, as Dodd’s likliest successor as chairman is Sen. Tim Johnson (D-SD), a very bank-friendly Democrat who would almost certainly produce a worse product. And this point hasn’t escaped Republicans, as the Wall Street Journal pointed out:
At the same time, [Dodd's] decision gives Republicans the incentive to draw out the process until after next year’s elections when a more business-friendly Democrat could ascend to the banking panel’s chairmanship. Next in line on the committee is Sen. Tim Johnson (D., S.D.), generally seen as more receptive to industry concerns.
According to Roll Call, “Senate Democrats said that no palace intrigue is expected to take place with the Banking panel” and that Johnson will take the gavel. So Republicans and the financial industry have ample motivation to gum up the works until Dodd is all the way out.
This same concern arose when it looked like Dodd might take the helm of the Senate HELP committee following the death of Sen. Ted Kennedy. Back then, Tim Fernholz wrote that “it would be bad news for regulatory reform if Johnson took over the [banking] committee; he’s received nearly a million dollars from the financial industry in the last 20 years.”
Johnson was the only Senate Democrat to vote against a credit card reform bill last year, and the banking industry has focused on him as one of the Democrats most likely to torpedo the CFPA. “No one is pro-industry today but he’s been historically very receptive,” said a top financial services lobbyist of Johnson. “He’s been sensitive to the impact of legislation on the financial service industry given the large number of jobs he represents.”
Even if Dodd gets a regulatory reform bill passed, as the investment research firm Concept Capital pointed out, Johnson’s chairmanship would likely result in other efforts to rein in banks going by the wayside. “His elevation to chairman should put to rest worries over interchange and interest rate caps,” the firm wrote.
There is one note of good news amidst all this, however: Connecticut Attorney General Richard Blumenthal will be running for Dodd’s seat, and he has been a strong advocate for consumer financial protection.
Cross-posted on The Wonk Room.
The Huffington Post’s Ryan Grim assesses that a Johnson chairmanship would mean “the biggest winners will be Wall Street, pay-day lenders and credit card companies. The biggest losers: widows and orphans.”