POLITICO (Washington) - The Wall Street reform bill is taking that rarest of paths through the Senate — actually gaining tougher provisions against the industry as it proceeds, not being watered down to win votes as health care reform was.
And that's put Republicans in a difficult spot. They like the bill less with each passing day but know they risk looking like they're siding with Wall Street if they vote no.
Even top Republicans such as Sen. Judd Gregg of New Hampshire predict the bill will pass as early as this week, but it's not clear yet how many Republicans will be willing to sign on to legislation they say falls short in key areas.
"I'm very concerned about the direction of the bill," Gregg said Sunday on C-SPAN, citing Democratic votes against a proposal by Sen. John McCain (R-Ariz.) on troubled mortgage giants Fannie Mae and Freddie Mac. "How can you take a bill up in the Senate and totally ignore that issue?"
Democrats know public opinion is on their side and keep pressing their advantage. The latest example came Thursday, when the Senate voted, 64-33, to pass an amendment by Sen. Dick Durbin (D-Ill.) that would allow the government to oversee debit card transaction fees.
Consumer advocates loved it. The industry hated it, because the small fees on millions of card swipes add up to big revenue for ailing banks.
"It's getting worse," one Wall Street official said. "And it was made much worse by the Durbin vote."
Senate Majority Leader Harry Reid (D-Nev.) may cut off debate on the bill as early as Monday with a procedural move that would require 60 votes, which would set up a final vote later this week.
Of course, the situation is provoking smiles at the White House, where officials are quietly thrilled by a political dynamic that's entirely different from the one they faced in the health care debate, in which asking many members to vote for the administration's proposal was asking them to risk their careers. Now, many members of Congress are eager to vote for the Wall Street measure — and scrambling to introduce measures to make it tougher.
That dynamic is playing out in vote after vote.
On credit-ratings agencies, the Wall Street establishment watched with horror as senators voted, 64-35, to upend the traditional way of doing business. Under the old model, firms issuing bonds would pay the ratings agencies to grade the offers — which critics called a conflict of interest.
The new plan would establish a credit-ratings board that would stand between issuers and raters, determining which agency issues the ratings for certain bonds.
Very few observers earlier in the year thought that Congress would change the ratings agency system much at all.
On an audit-the-Fed proposal that was once deemed a long shot to be included in the bill, senators voted 96-0 to add a compromise plan that would allow the government to audit the actions of the Fed during the 2008 economic crisis but not its activities generally.
That overwhelming vote stood as a stark bipartisan contrast to the often party-line votes that held the health care bill together.
Asked whether the bill is getting tougher as it goes through the Senate, Durbin said, "Yeah, I think so. I think there's been some improvements on it. And some of the challenges trying to weaken it have been defeated."
Of the Republicans, Durbin said, "I've always thought that they want to be part of Wall Street reform. I think that's why the filibuster crumbled."
The politics behind the change are clear: An NBC News/Wall Street Journal poll taken May 6-10 found that Wall Street is enormously unpopular in America — Goldman Sachs, for example, had an approval rating of just 4 percent. That's lower than BP at 11 percent amid the Gulf oil spill and Toyota at 31 percent after the repeated recalls.
President Barack Obama, by contrast, had a 49 percent approval rating in the poll.
That gives the president and his allies in Congress every incentive to be seen as reining in out-of-control Wall Street executives and very little incentive to be seen as casting a vote that, in an election year, can be characterized as pro-Wall Street.
For Republicans hoping to blunt some of the most dramatic changes, the politics of the Wall Street bill are growing more difficult.
"I say this facetiously, but for those of us who want a good bill, we should file cloture, because every day it gets worse," Sen. Bob Corker (R-Tenn.) said. By that, he meant that Republicans would be better off voting for the bill now, rather than letting debate continue, because they like the measure less and less as the process continues.
That's dismaying to Alabama Sen. Richard Shelby, the top Republican on the Senate Banking Committee.
"Will Republicans support this bill? I wouldn't think that many of them would support this bill," he said.
For now, the bill's momentum has split Republicans into two factions — one group, which includes Corker, that would like to call a vote as soon as possible before the bill, from their perspective, gets worse. The other argues for extending debate, hoping to shape the bill with new amendments.
Gregg, who worked extensively to resolve controversial derivatives issues, last week echoed Corker's message. "It's pretty obvious that the Democrats have decided to go with the language that's in the bill ... and it's extremely detrimental language to Main Street and to people who use credit in this country, but that's their position," Gregg told POLITICO. "We should probably finish this bill at some point because it's getting worse every day.
Moderate Republicans, however, claim substantive work on the bill can still be done and say the amendment process should continue.
Sen. Olympia Snowe of Maine is viewed as one Republican likely to vote for the bill in the end, but she has serious reservations about cutting off debate.
"There's no reason to rush a major initiative of this kind. We've grown so accustomed to just putting things on a fast track — it's a new legislative approach that's going to do a greater disservice to the country if we don't get this right," Snowe said.
Republican leaders say they are reserving judgment on the series of votes that could begin as early as Wednesday. A GOP leadership aide said Friday that it is too soon to tell how Republicans will vote when cloture is filed.
"I don't know that he'll ever recommend that they vote for this bill," a GOP aide said of Senate Republican leader Mitch McConnell's approach with his caucus. "But I think once people are satisfied with the number of amendments, maybe that will be different." (c) Capitol News Company, LLC 2010
