Last night, Republicans released their counter-proposal to Chris Dodd’s Financial Reform Bill (full text here). I don’t claim to have read either in its entirety, but the general consensus seems to be that they are not all that fundamentally different. Annie Lowrey of the Washington Independent has a good comparison of the two proposals. Here is some of what she has to say:
First, the similarities. There are many. Both bills create systemic regulators to keep watch over risky firms. Both ensure that taxpayers will never be on the hook for Wall Street bailouts again by creating some form of resolution authority – Democrats by taxing banks for a $50 billion liquidation fund, to be used in the event that a systemically important bank needs to be shut down; Republicans by requiring that the Federal Deposit Insurance Co. get back any government money spent in the process of liquidation. Both require hedge funds to answer to a regulator: in the Democrats’ case, the Securities and Exchange Commission; in the Republicans’, a new oversight committee. Both vaguely hold that credit ratings agencies will receive bolstered oversight, but in both cases, the ratings agencies’ fundamental business models do not change. Both provide weak proposals to institute some form of the Volcker Rule, banning proprietary trading at many banking institutions. Both improve Fed oversight, though without a strong requirement for an audit of the Fed’s books. Both create a powerful consumer financial protection agencywith rulemaking authority, though only in the Democrats’ version would the CFPA have the ability to oversee firms like payday lenders. Both make derivatives a regulated product, Democrats by requiring that derivatives used by financial firms to speculate go through clearinghouses; Republicans by giving a regulator authority to say if they should. Both make the president of the Federal Reserve Bank of New York a presidential appointee.
From all appearances, both sides seem to be pretty much on the same page on this one (or at least in the same book). Unlike, say, health care reform, everyone agrees on what needs to be addressed and the basic mechanisms for addressing them. The differences are only in the details, not in the fundamentals. This should be good news, right? I’m not so sure. Ezra Klein does a good job getting to the meat of it:
You can take that one of two ways. Optimistic spin: The two sides aren’t that far apart on policy, so compromise, and thus passage, will be easy. Pessimistic spin: The two sides aren’t that far apart on policy, which proves this is a political fight, which means compromise will be nearly impossible.
Considering that the two sides are within shouting distance of each other on this, and that Senate Republicans have now twice filibustered even bringing the bill to the floor for debate, I’m not getting a warm and fuzzy feeling about this. In Normal Times, when two sides agreed on the basics but differed on the details of a bill, they would get together and negotiate. Each side would give a little and they’d meet somewhere in the middle. But these are not Normal Times. These are the Times of No. Unless and until the Republican Party abandons its policy of “We don’t negotiate with the enemy”, I don’t see this going very far. The best hope is to peel off a few Republicans unwilling to appear to stand with Wall Street in an election year. We’ll see.