Chris Dodd's Exit Could Harm Financial Reform
Word that Sen. Christoper Dodd's won't seek reelection is stirring speculation about who could replace him. That has major implications for the financial industry because Dodd is chairman of the Senate Banking Committee, one of the two most important congressional panels (along with House Financial Services) overseeing legislation that affects the sector.
It's also important for anyone with an interest in the future of financial reform. Committee chairmen have enormous discretion over what bills live or die. Dodd later this month will lead Senate deliberations over his mammoth bill to impose stronger restrictions on Big Finance.
My friend Jaret Seiberg, an astute observer of the Washington scene, and his colleagues at investment research firm Concept Capital this morning size up the leading contenders for Dodd's seat as head of Senate Banking. Their assessment is discouraging for those of us hoping that Congress shortens the leash on financial firms. "Beyond 2010, we believe this could be a positive for banks as his likely successors as Senate Banking Chairman may be friendlier to parts of the financial sectors," they write.
I've italicized the choice bits:
Sen. Tim Johnson (D-S.D.). Johnson is next in line in terms of seniority. Normally he would be a slam dunk for the job. But he suffered a stroke-like illness several years ago and has not fully recovered. Johnson is widely viewed as a friend of the credit card sector and his elevation to chairman should put to rest worries over interchange and interest rate caps.
Sen. Jack Reed (D-R.I.). Reed is a moderate Democrat who receives high marks from the financial services sector. We note that Reed has a very close working relationship with House Financial Services Chairman Barney Frank (D-Mass.). This means bills emerging from the House and Senate may be more alike than in the past, which improves odds for enactment. Reed is viewed as an independent thinker willing to stand up to consumer groups despite his legal background. For banks, having a chairman who understands the unintended consequences of legislation is critical. Reed fits that bill. That bodes well for industry efforts to block legislation to dismantle large financial firms.
Sen. Charles Schumer (D-N.Y.). At first blush, one might think Schumer would be a negative for financial reforms. He is a populist, but during his career he has repeatedly taken steps to protect financial jobs in New York. Prior to the crisis he issued a report with Mayor Bloomberg discussing ways to roll back U.S. regulations to make the U.S. financial system more competitive. This means Schumer's rhetoric may scare some, but his legislative work should be a plus for the industry. At a minimum, we would not expect Schumer to support legislation to break up the biggest banks or crimp their business prospects.