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Regulators, Mount Up

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On Wednesday afternoon, Commodity Futures Trading Commission Chairman Gary Gensler appeared at the Chamber of Commerce conference not long after Wolin. Gensler has made a name for himself this last year as one of the most aggressive advocates of regulation in Washington. He delivered a typically forceful speech on derivatives, calling on the Chamber to fight for the interests of all 3 million of its members, not just the big financial institutions that seem to dominate the organization at times. On his way out, Gensler ran into the Chamber’s always-dapper president, Tom Donohue, and couldn’t resist cracking a joke—complimenting him for scheduling the conference for the week health care reform passed. Donohue just smiled dyspeptically. 

Of all the groups who’ve been caught off guard by the latest twist in the reg-reform saga, none has been more so than the banks and their Washington representatives. The big banks have been resigned to some sort of comprehensive reform for months now, but planned to make a stand on particular issues, like the consumer protection agency (which JP Morgan Chase has led the charge against), and the so-called Volcker Rule restricting government-backed banks from making speculative bets. (Goldman has taken the lead on this front.) The smaller banks were up in arms about the possibility of a string of new regulatory mandates. And all were operating under the assumption that they had a lot more time to make their case. One administration official who’s seen internal emails from a leading Wall Street lobbying group told me flatly, “They’re not ready for this to be now.”

Before health care reform passed, according to this official’s reading of the emails, the banks had assumed they could rally a group of Democrats to block any measure they deemed excessive—the kind of thing that used to pass for bipartisanship in Washington. Since health care, says the official, “Democrats are seeing the value in holding together,” and so the banks are scrambling to produce a far-inferior plan B: holding the line with all 41 Senate Republicans. The problem, of course, is that a reform counteroffensive composed entirely of Republicans looks suspiciously like the party is doing Wall Street’s bidding—precisely what the banks and the GOP want to avoid.

The fundamentals look pretty good for the reformers, in other words. Still, Democratic officials are guarding against overconfidence. If nothing else, there’s a concern that the banks could make inroads on some of the bill’s more arcane provisions—the details unlikely to gin up public outrage but which are fundamental to reforming the financial system. “The consumer agency, the Volcker rule, too big to fail, to some extent the Fed stuff—they’re the meat of it. Derivatives--there’s not going to be a lot of showy big floor fights on that,” says one anxious Senate staffer.

And so the administration is keeping the pressure on. Wolin’s speech at the Chamber was positively blistering—accusing the organization of launching “a lavish, aggressive and misleading campaign to defeat the proposed [consumer] agency.” And Obama, perhaps having learned the lesson of health care reform, has urged Dodd and Frank not to dither. “With a two week recess coming--notwithstanding the acknowledgment that something’s going to happen here by Republicans on the committee--we want to continue to build momentum,” says one official. It looks like this bill is headed across the finish line with more than just a nudge.  

Noam Scheiber is a senior editor of The New Republic.


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