Resolving internal party differences, Democratic leaders decided late Sunday to insert into the bill a proposal by Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) that cracks down on derivatives trading, the financial instruments that contributed to the economic meltdown, according to a Democratic Senate aide close to the negotiations.
Lincoln’s plan, which was considered the most restrictive of those under consideration, had broad backing – Sen. Chuck Grassley (R-Iowa) supported it in the Agriculture Committee, Sen. Olympia Snowe (R-Maine) endorsed it Friday, and progressives repeatedly urged Dodd to include it in the overall bill. But the move signals a defeat for Wall Street firms that lobbied heavily against it and could upset some Republicans, who sought more exemptions for non-financial firms from transparency requirements.
It was unclear late Sunday whether the derivatives proposal would be enough for Snowe, a top target for Democrats, to support the bill.
Earlier Sunday, Dodd and Shelby suggested that an agreement on the overall bill could be just days away, maybe a week.
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The impasse reflects the pressure on the top negotiators – on Dodd not to dilute the bill in any significant way or face grumbling from his left flank, and on Shelby to extract concessions meaningful enough for Republicans to say their initial opposition paid off.
Dodd had faced strong pushback from progressives not to weaken the tough Lincoln proposal. It includes a provision that even the Obama administration has resisted, barring companies that deal in swaps, a form of derivatives, from receiving federal assistance – a move that would effectively force firms to spin off their swaps desks, resulting in the loss of potentially billions in annual revenue.
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Senate Democrats are wary of conceding much of anything to Shelby, arguing that their negotiating position, at this point, is as strong as it will be. Democrats believe the perils of being cast as a big bank defender are so great for Republicans that at least one or two moderates will break ranks Monday, so why weaken the bill before it hits the floor?
Republicans acknowledge privately that the headlines won’t look good if the entire conference votes unanimously against consideration of the bill. But with both sides expected to return to talks soon after the vote, they are betting on the storyline shifting quickly.
The short-term hit will be worth the longer-term gain of producing a more conservative measure, Republicans aides said. Republicans also argue Democrats are overestimating the political staying power of this single vote, as long as a bipartisan deal is eventually released.
