Tell Congress: Televise Wall Street Reform Conference Committee!

The Senate passed their version of Financial Services Reform last night by a vote of 59-39. Hours earlier, they invoked cloture by the slimmest of margins: 60-40.

Now the bill advances to a conference committee with the House, where a handful of Senators and Representatives get to hammer out the differences and come up with one final bill. This final bill must pass both chambers again before Obama can sign it into law.

David Dayen of FDL has a great run-down of the differences between the two bills:

• The Volcker rule. Contrary to some media reports, there is a “Volcker rule” in the Senate bill; it essentially authorizes a study and tells the regulators to come up with something on it. This is but one of the 28 “studies” in the bill. The House bill passed before there was such a thing as the “Volcker rule” in the lexicon, so that’ll probably be the best we can get here. But we should at least get that.

• The Fed. The House bill has a full annual audit of the Federal Reserve; the Senate bill has a one-time audit of emergency lending facilities. In addition, the Senate bill allows a much bigger role for the Fed than the House version; in fact, the Fed gained more power while the Senate bill was on the floor. Some of that could be reeled in if the House language is adopted.

• Derivatives. Everyone expects the 716 provision, which forces the mega-banks to spin off their swaps trading desks, to be excised in conference. But Michael Greenberger believes something like it will be retained. The House’s derivatives piece is a mess and nearly useless, but Barney Frank has admitted a mistake on that front, and wants to preserve strong rules against derivatives, like in the Senate bill.

There’s also the matter of Maria Cantwell’s main complaint, that the mandate of all trades going through clearinghouses is unenforceable. Obama Administration officials appear to think this is a misreading of the legislation, and that Cantwell’s fix could have unintended consequences. So it looks unlikely that this loophole will be closed, if the major players in conference don’t think it’s a loophole.

• The CFPA. The House bill has an independent Consumer Financial Protection Agency with a compromised, exemption-riddled mandate. The Senate bill has a CFPA inside the Federal Reserve but without as many exemptions. Both bills include some pre-emption of state consumer financial protection laws, though the Senate bill preserves a role for the state Attorneys General in enforcement. A mix of both of these would be preferable. The Senate motion to instruct conferees will urge adoption of the auto dealer exemption from the CFPA, which is in the House bill, but given the Administration’s position there is almost no chance that conference will adopt that.

• Capital requirements. The House bill, in its strongest plank, has a hard 15:1 leverage cap for financial institutions. The Senate bill leaves capital requirements and leverage up to the regulators, although the Collins amendment does force bigger banks to have stronger requirements. The more distinct and specific the language is, the better. And the bank lobbyists will work hard to get the opposite, pure discretionary language.

• Credit rating agencies. There were two competing options for the rating agencies: end the conflict of interest by giving government more of a role, or end the rating agency process altogether. The Senate kind of opted for BOTH approaches, with the Franken amendment empowering an SEC bureau to assign initial ratings to qualified agencies, and the LeMieux amendment eliminating the qualified “seal of approval” for the rating agencies. Franken insists they’re compatible. The House has language similar to the LeMieux amendment. If possible, the Franken amendment should be retained.

• Mortgage underwriting. Both bills actually have some pretty good new standards for mortgage lending, banning the premiums for pushing borrowers into riskier loans, and forcing some ability to pay. This is likely to stay in the bill.

• Interchange fees. One of the toughest measures in the Senate bill changes the swipe fees charged to local merchants when their customers use debit cards. The bank lobbyists will have their knives out for this one.

In my opinion, the two most important pieces to preserve are the 15x leverage cap, which ensure that companies will not borrow more than 15x their worth, and the derivative regulations. The companies that got into the most trouble in 2008 were those who borrowed more than 30x their worth and came crashing down when it turned out that their investments were worthless. And the derivatives market must be brought under control. There is no reason to have a largely unregulated market that is worth $600 trillion, ten times the GDP of the entire world.

How can we prevent these provisions from being gutted now that the bills are off the floor?

Well...

Should the final act of the financial reform fight be televised? If it is, it would make any efforts--whether Republican or Democrat-led--to weaken the final product a heavier lift. And so there will be significant pressure to cut the final deal in as much darkness as possible. But if that's the route legislators decide to go they'll have to walk back from earlier nods toward the importance of transparency

Several weeks ago, House Financial Services Committee Chairman Barney Frank dared Senate Republicans to oppose Wall Street reform, and warned that, after the Senate passed its legislation, any further efforts to weaken the final product would have to be public: a formal conference committee to iron out the differences between the House and Senate bills, even a C-SPAN camera so the whole world could see where each party stood.

Well, last night, the Senate passed its bill, and on Monday the Senate will take formal steps to begin the conference committee process. And in conversation, key Republicans and Democrats last night say they think inviting the cameras along would be just fine.

If the conference committee is televised, it will become much more difficult for members of Congress to strip out the strongest parts of the bill. The amendment process on the Senate floor strengthened the bill overall once Senators were on camera and told to "put up or shut up" regarding their tough-talk against Wall Street. Furthermore, with a televised conference committee, progressives can better target troublesome members when they work to weaken the bill.

If you'd like to see the conference committee conducted in the open, please call your Senator or Representative. This is especially important if your member is the chair or ranking member of the relevant committees and subcommittees:

Barney Frank (MA)
Spencer Bauchus (AL)
Paul E. Kanjorski (PA)
Scott Garrett (NJ)
Maxine Waters (CA)
Shelley Moore Capito (WV)

Christopher Dodd (CT)
Richard Shelby (AL)
Blanche Lincoln (AR)
Saxby Chambliss (GA)

If your member is on the Senate Banking Committee or the House Financial Services Committee, please give them a call!

The Senate will be acting on this issue on Monday. Action must be taken as soon as possible.

Thanks for your help!

Tell Congress: Televise Wall Street Reform Conference Committee!

The Abuse Amendment

Something funny I came across while reviewing the proposed amendments to the Financial Reform bill:

SA 3933. Mr. CORKER submitted an amendment...to the bill S. 3217...; which was
ordered to lie on the table; as follows:

On page 1291, line 15 strike ``, DECEPTIVE, OR ABUSIVE'' and insert ``OR DECEPTIVE''.
On page 1291, line 20, strike ``, deceptive, or abusive'' and insert ``or deceptive''.
On page 1292, line 1, strike ``, deceptive, or abusive'' and insert ``or deceptive''.
On page 1293, strike lines 3 through 20.
On page 1293, line 21, strike ``(e)'' and insert ``(d)''.

The part of the bill that would be changed by this amendment is Section 1031: Prohibiting Unfair, Deceptive, or Abusive Acts or Practices. The amendment strikes the use of the word "abusive" from this section and removes the subsection that bans financial institutions from '"interfer[ing] with the ability of a consumer to understand a term or condition of a consumer financial product or service" or "tak[ing] unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service."

I have no idea why Bob Corker wants to specifically allow abusive practices to continue, but it strikes me as particularly funny that his amendment is designed to strike the ban on banks and credit card companies abusing their customers.

The Abuse Amendment

236 Days

In the coming days, Congress will finally pass the long-debated financial services reform bill, S3217. The Republican leadership in Congress is warning Democrats about the peril of moving "too quickly" on the legislation, and are toying with the notion of further delaying action on the bill. In April, the Republicans insisted on holding cloture votes over the question of even bringing the bill up for debate--and they defeated cloture. Twice. Eventually, the Republicans folded and allowed the Senate to debate the consideration of the bill.

Republicans are now threatening to delay the bill further, possibly requiring the Democrats to file for cloture on many of the proposed amendments.

In the House, bills are sometimes brought to the floor under an "Open Rule". This allows any germane amendment to be brought up for a vote. With a quorum present, amendments can be easily knocked out via voice-vote or with quick, 15 minute votes by electronic device.

Because of the cloture rules, however, the Senate can't do this. The Majority Leader (often in conjunction with the Minority Leader) calls the shots and can only allow a fraction of the proposed amendments to have their time on the floor. Normally, when an amendment is brought up, a unanimous consent agreement waves the normal rules and establishes new rules for a short debate and a vote. If there is an objection to this agreement, however, cloture must be invoked for the amendment to be debated. This involves a three-day wait before the cloture vote, and then a 30 hour debate after cloture is agreed upon.

This would be for each individual amendment.

There are currently 189 proposed amendments to the Financial Reform bill.

If each were brought to the floor, and only one Senator objected to each of them, it would take 236 days for the Senate to get through them all.

This is why the Senate can't have nice things. This is why it's said that each Senator carries with them a nuclear bomb.

Ironically enough, the evil, majoritarian House of Representatives can actually have a greater number of amendments considered and therefore have a more inclusive debate over the legislation than the infamously deliberative Senate. Because of the asinine cloture rules, the Senate can only address a handful of amendments on a given bill, while the House can easily address dozens.

It's no wonder that people are clamoring for Senate reform. While thousands of bills are proposed every legislative session, only a small fraction of them can ever be brought to the Senate floor. Time on the floor is the most valuable commodity available, but it can be wasted for days at a time due to objections by one Senator.

This is the same reason why the Democrats can't bring up the dozens and dozens of unconfirmed nominations to various executive branch positions. The Democrats have the votes to confirm the Deputy Undersecretary for Multifamily Housing, but as long as one Senator threatens to require cloture, it would take over a day to get through each nominee. It would take over three months to get through all the delayed nominees.

Something has to give. Either the rules for cloture must be reformed (say, limiting it to only the final passage of legislation, not amendments and executive business) or the filibuster--and thus cloture--must be eliminated.

We need a new, streamlined Senate to handle the 21st Century needs of the country. With a bigger nation--and a bigger government--the Senate needs to have the tools necessary to deal with the issues of the day. That fact is not open for debate.

236 Days

Republicans to Accept Bribes to Oppose Wall Street Reform

As you've probably heard, the Republican Senate Caucus is going to the mat to block Wall Street Reform from being passed:

The fate of financial reform in the Senate remains very much in flux tonight, with Democrats facing the stark reality that Senate Minority Leader Mitch McConnell has once again managed to unite his caucus in opposition to the Dems' top legislative initiaive. But Democrats remain determined to bring their bill up for a key test vote as early as Monday, and have statements from a number of Republican senators to point to as evidence that they will prevail sooner rather than later.

This seems like a popular issue. Politicians get to demonize Wall Street, tell their constituents all sorts of stories about Wall Street excess, tell them how irresponsible bankers flushed away millions of jobs and trillions of dollars and caused the greatest economic downturn in over 75 years...It seems like a win-win issue for any politicians who jumps on the regulatory bandwagon! Why in the world would anyone side with Wall Street for such a fight?

Maybe...

About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.

...

[The Republican Leaders] also said that they have a shot at taking control of the House by adding 40 additional seats to their current total. In New York State alone, the senators predicted a six-seat pickup.

But in order to assure those gains, and add even more, McConnell and Cornyn made it clear they need Wall Street's help.

Again with the bribes. Republicans meet with bankers, and tell them that it would be a shame if Wall Street Reform were to pass. If only there was some way for these hedge-fund managers to show that they are serious about supporting the Republicans in the upcoming election.

The Democrats are, rightfully, pointing out this conflict:

Since Republicans appear to be conducting backroom negotiations with these same people who took our economy to the brink of collapse, the public deserves to know what secret deals and carve-outs Republicans are offering Wall Street executives in exchange for their support.

For some reason, though, they are reluctant to use the correct terminology here: When an elected official takes money in exchange for a favor, it's called a bribe.

Democrats aren't immune to this, either. Harry Reid and Chris Dodd have collected plenty of cash from Wall Street types over the years. Payments like that can't not have an effect on the legislation that they are now pushing through. Perhaps we need some rules in place to bar people from serving on or chairing committees that oversee the businesses of their biggest contributors.

Or, you know, maybe we should institute sensible campaign finance reform that ends this system of quid-pro-quo.

Republicans to Accept Bribes to Oppose Wall Street Reform