In general, the regulatory reform bill that’s already passed the House of Representatives is pretty good. And typically when legislation goes from the House to the Senate it gets less progressive. But one real weak spot of the House bill is its treatment of derivatives, where it sets up a good framework for putting them on a clearinghouse but then ruins it with a proliferation of loopholes and exemptions. The talk out of Chris Dodd has been that he’s aiming for something better, and even Barney Frank (the main author of the House legislation) seems to now see the need for tougher measures.
But for historical reasons (and also because congressional procedure seems designed to make legislation as bad as possible), however, the Finance Committee shares jurisdiction over derivatives regulation with the Agriculture Committee. And there’s been enormous speculation around town that Ag Chair Blanche Lincoln is going to serve up something very weak. The complicating factor, as reported by Benjy Sarlin is that Lincoln is facing a primary challenge from the left from Arkansas Attorney General Bill Halter and he’s eager to make an issue out of this:
Lincoln’s Democratic primary opponent, Bill Halter, is already seizing on financial reform as a potential angle of attack, which could put pressure on the incumbent senator not to stray too far from the administration line.
“As a member of the Agriculture Committee, Senator Lincoln had jurisdiction over derivatives for years but clearly did not do nearly enough to provide appropriate oversight,” Halter said in an e-mailed statement. “I support the strongest possible financial reform bringing more accountability to our financial markets so that another financial meltdown doesn’t happen. The reforms in Senator Dodd’s bill should be seen as a floor, not a ceiling.”
Obviously members from more conservative states are going to need to be more conservative on certain issues. But I’m hard-pressed to imagine that the voters of Arkansas are demanding loopholes in derivatives regulation.