The Senate Banking Committee voted on strict party lines Monday to send a sweeping financial regulation reform bill to the full Senate, as a flood of proposed amendments threw plans for a week-long review -- and prospects for a bipartisan compromise -- into disarray.  

In a choreographed session designed to move the bill and negotiations forward, only the committee chairman, Sen. Christopher Dodd (D-CT), and the top Republican, Sen. Richard Shelby (R-AL), made opening comments at the “mark up,” which lasted less than 20 minutes. All 13 committee Democrats voted for the bill; all 10 Republicans voted against it. Members considered no amendments.

Democrats now plan to try to negotiate a bipartisan measure with Republicans before the bill hits the Senate floor later this spring.  Members voted on a reform plan authored by Dodd, who introduced it a week ago after failing to cut a deal with committee Republicans.

Dodd said last week he ended discussions with them because talks were taking too long and he worried he was running out of time to get a bill completed this year. Dodd is retiring from the Senate after this session.

“OK, Chris, you did well--we gotta work this now,” Shelby said to Dodd today, in a side remark caught by committee microphones seconds after the mark up ended.  

Earlier Monday, a lead Republican negotiator on the committee, Sen. Bob Corker (R-TN), told FOX Business, “The cast of characters in the full Senate will be different. I actually personally believe, in spite of the fact I wanted to work through this bill in detail this week, I think we do have a better chance of getting something that is bipartisan on the Senate floor than we do in our committee. I do think that is unfortunate after two years of hearings. But at the end of the day, it is the best step.”

Lobbyists, analysts and senators had mixed reviews of today’s move.

“There was never going to be a deal in committee, so this may really be a bullish sign,” said Jaret Seiberg, financial services analyst with Concept Capital’s Washington Research Group.

“I'd say it's a coin flip whether they're able to accomplish this legislation in this Congress,” said Taylor Griffin, a partner at Hamilton Place Strategies, a Washington research and public affairs firm. “There's not a lot of time left. There are very difficult issues.”

“Anyone who tells you they know whether this is going to pass should be tried for malpractice,” said Sen. Ted Kaufman (D-DE).

Republican committee members submitted about 300 proposed amendments to Dodd by a Friday committee deadline.  Democrats filed about 100 amendments.

“I introduced 98 amendments,” Corker said in his interview. “They were all constructive. This is a serious problem where serious people should sit down and come up with something that will withstand the test of time.”

Among other contentious issues, Dodd has proposed a new consumer financial protection division at the Federal Reserve, an idea supported the Obama Administration. It would regulate the sales of mortgages, credit cards, home equity lines of credit and other financial products. Supporters say the division is necessary to prevent predatory and shady marketing practices of such products.

But Republicans oppose the division, saying it would create an a unnecessary new bureaucracy that will raise costs to consumers and limit innovation of financial products.

“Consumer protection took a big turn to the left over 10 days and that needs to be brought back to the middle of the road,” Corker said.

In a speech, Treasury Secretary Timothy Geithner restated the Administration’s support for a strong consumer financial protection operation, with an independent director appointed by the President, and for financial reform in general.

"We are at a defining moment in the great debate about financial reform,” Geithner said at the American Enterprise Institute. “it's been two and a half years since the crisis started.  It's been nine months since President Obama first laid out a proposal for comprehensive reform. And it's been three months since the House of Representatives passed a major reform bill. This is an enormously complicated issue. We have to get it right.  But we know all about the choices. Now we have to decide whether or not we are going to act."

Another issue senators are wrestling with is creating tough rules to prevent future taxpayer bailouts of firms now considered “too big to fail.”

“We want to absolutely insure that taxpayers are not at risk,” Corker said.  

In a speech to bankers Friday, the chairman of the Federal Deposit Insurance Corporation, Sheila Bair, charged the Dodd bill would create loopholes to allow the Federal Reserve to continue to make emergency loans to individual firms in a future crisis if regulators designated them “financial utilities.”    

“We do have serious concerns about other sections of the Senate draft which seem to allow the potential for backdoor bailouts,” she said. “If the Congress accomplishes anything this year, it should be to clearly and completely end too big to fail. Never again should taxpayers be asked to bail out a failing financial firm. It's time that the big players understand that they sink or swim on their own."

In the bill approved by the committee today, Dodd amended the text to delete the Fed provision.

“We informed Chairman Bair’s office…that the provision she is concerned about will be removed,” a Dodd spokesperson said earlier.

Another big sticking point for senators is regulation of derivatives. Areas of dispute include whether to exempt certain derivative contracts – more complicated “customized” contracts  as distinct from “standardized” contracts – from tougher government oversight. Senators are also battling over how much collateral derivatives parties should hold in their trading; collateral is a common requirement in many other financial transactions.

“All of us want to see proper collateral put up against derivatives,” Corker said. “I think that had that occurred during this last cycle, much of what we saw wouldn't have happened. But at the same time, there needs to be an appropriate exclusion.

“There (are) activities that are taking place in the (Senate agriculture) committee around commodities that still have not come out yet,” Corker said. “So I think on the derivatives piece we still have a long way to go to get it right. It's complicated.  Even if you spent your whole life in derivatives, figuring out the best way to regulate it is difficult…My sense is we will get it right.”

Griffin said that by pushing the bill through the banking committee quickly, senators will move to “negotiations behind the scenes with, as Sen. Corker has said, a bigger cast of characters, to give Dodd more options -- to be able to get 10 or 15 Republican votes on a bipartisan bill that will offset Democrats he might lose. He will probably lose six or seven Democrats if he makes concessions to Republicans to get a bipartisan bill, so he will need a lot of Republicans to make up for that.”

Analysts predict that if senators don’t approve a compromise bill this year, they will return next year to reform. after Congressional mid-term elections this November reshape the Senate. The House approved a reform bill in December last year.


Dodd's Revised Financial-Regulatory Reform Bill



Summary of Manager's Amendment