WASHINGTON — Senate Banking Committee Chairman Chris Dodd abruptly abandoned his plan to press ahead with a partisan vote on his regulatory reform bill next month after running into bipartisan opposition.
During debate on the legislation Thursday, several panel members said the legislation was not well constructed and nowhere near ready for quick action. Though lawmakers said they generally agreed on the goals of the Connecticut Democrat's legislation, they faulted just about every part of his execution.
Republicans were particularly critical, arguing that Dodd was being hasty. But several Democrats also raised objections to the bill's core concepts, including creation of a single banking supervisor.
Sen. Michael Bennet, D-Colo., warning of "unintended consequences in the bill," urged Dodd to create a bipartisan product before moving forward.
The significance "of the issues at stake [makes] it … vital that we don't look back at a bill that doesn't have both Democrats and Republicans because these issues are too important and the consequences of getting things wrong are too serious," he said.
Dodd appeared chastened by the criticisms. In an interview earlier this week, he had pledged to move ahead with a partisan vote if Republicans were unwilling to sign on to the legislation.
"I've got 13 votes, presumably, I could put together to get the bill out of committee," Dodd said, referring to the number of Democrats on the panel. "I'd rather have a real reform bill that involves consensus, but if I have to do it the other way, I will."
But by the end of the debate, Dodd said he would hold off on trying to force the bill through and attempt to work with Republicans and Democrats on the legislation.
"I sense a lot more common interest on at least 70% of the issues here," Dodd said after the committee's debate. "Earlier today I proposed I wanted to receive all amendments by Wednesday … but in light of all the commitments made to really roll up our sleeves and go to work … I'm going to delay that deadline."
His comments came after a litany of complaints from Democrats and Republicans.
Sen. Tim Johnson, the panel's No. 2 Democrat, raised a host of problems he saw in Dodd's legislation, including provisions that would consolidate banking supervision into one agency, create a Consumer Financial Protection Agency and eliminate national bank preemption.
"I do have some concerns with this legislation as it currently stands, especially in the areas of federal preemption and the effects of the CFPA on small community banks and credit unions," said the South Dakota Democrat. "I also am not sure that a single federal regulator for the banking industry is the best solution."
Johnson said the bill needs to "strike the right balance that strengthens regulation where needed but doesn't unnecessarily harm community banks and credit unions who were not the cause of the financial crisis."
Sen. Evan Bayh, D-Ind., said he, too, was afraid the bill would create an unwieldy government bureaucracy and signaled that he preferred legislation supported by senators from both political parties. "We have to have a healthy degree of modesty about the efficiency and efficacy of government," he said. "I don't think we can replace the efficiency of the marketplace with government. We need intelligent, efficient regulation … ; otherwise we end up harming capital formation and business formation. Building as much consensus as possible gives us the best chance for getting there."
The Republicans, meanwhile, pulled no punches in their critique of the legislation, going so far to as to suggest that even Dodd did not agree with everything in his 1,139-page bill, which he unveiled Nov. 10.
Sen. Bob Corker, a Republican who has forged a strong relationship with Dodd, made an impassioned pitch on Thursday to work together. "If this bill became law, as is, we wouldn't be talking about systemic risk. We would be talking about pandemonium," he said. "It would have a cratering impact, and I think the chairman knows that and his staff knows that."
Corker and Sen. Mark Warner, D-Va., have been bringing in experts for months to discuss regulatory reform ideas.
The Tennessee Republican said that, after a recent meeting with the staffs of several lawmakers, including those of Dodd and Warner, as well as a group of Federal Deposit Insurance Corp. lawyers, he left with "more questions than answers."
"I disagree with much that's in there, and candidly, I think you disagree with much that's in there," Corker told Dodd. "My sense is, if we move something to the floor and we don't have strong bipartisan support, we are going to end up with all kinds of populist amendments on the floor … ; some of these amendments are going to sound really great, and I think they are going to destroy the financial system."
Corker said this was committee members' chance to "act like adults."
For his part, Dodd said it had always been his intent to work across the aisle and that he planned to make shaping the discussion draft an inclusive process. "I welcome the comments from my friend from Tennessee, and I plan to proceed along those lines."
The sharpest critique came from Sen. Richard Shelby, the panel's ranking Republican, who shredded the legislation nearly section by section, saying it does not accomplish Dodd's goals.
Though Dodd has said the bill would erase the "too big to fail" doctrine because it would let the FDIC resolve systemically important companies, the Alabama Republican pointed to provisions that would let the agency give open-bank assistance to such companies and let the Federal Reserve lend to them.
"The ability of the FDIC and the Fed to bail out insolvent institutions gives regulators a way to avoid invoking the resolution authority, significantly diminishing the possibility that resolution will ever be achieved," he said. "Even if invoked, the Dodd bill's resolution authority does not effectively require companies to be resolved" because it "explicitly states that companies placed into receivership do not have to be liquidated, placed into a bridge bank or otherwise wound down."
Shelby also sharply criticized the concept of a single regulatory agency, saying it would eradicate the dual banking system, and he vowed to protect the FDIC's state banking supervisory powers in a Republican alternative.
"The bill requires a complete rewrite, and we intend to offer a substitute," Shelby said on behalf of the committee's Republicans.
