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Financial system reforms won't wait

By David Cho and Brady Dennis
Washington Post Staff Writer
Friday, March 12, 2010; A11

Senate banking committee Chairman Christopher J. Dodd (D-Conn.) said Thursday he will move forward next week with sweeping legislation to revamp the nation's financial regulatory system, despite failing to resolve key differences with Republicans.

Although Dodd said he will continue bipartisan talks, unveiling the measure on Monday puts pressure on GOP senators by creating a sense of urgency and forcing the debate into the open. Republicans opposed to key elements of the bill, such as new protections for consumers, would have to make their case publicly.

After months of talks, the two sides have been unable to reach final agreement over the enforcement powers of a new consumer watchdog, the scope of the Federal Reserve's regulation over banks and the financing of a new authority that would allow the government to wind down large, troubled financial firms without cost to taxpayers.

Dodd said he decided to introduce his bill so the committee could begin discussing it before the Easter recess in early April. He also had been facing pressure from liberals who feared he was compromising too much during recent negotiations.

"Clearly, we need to move along . . . as time moves on, it does limit the possibility of getting something done," Dodd told reporters. "The idea of putting something on the table is not a reflection of something breaking down. Quite the opposite."

Dodd's strategy risks estranging Republican senators who might be willing to support a deal. While Dodd conceivably could move a bill from his committee with only Democratic support, he ultimately must garner GOP support. Democrats control only 59 votes in the Senate, and 60 votes would be needed to overcome a Republican filibuster.

Dodd's decision appeared to wound his closest Republican ally on the committee, Sen. Bob Corker (R-Tenn.). The pair had worked for weeks to resolve thorny issues, and both men had said they were on the brink of a deal. A visibly dejected Corker said he was disappointed to learn of Dodd's decision during a meeting Wednesday afternoon.

"There was no breakdown. Like, none," Corker told reporters. "What happened was, you were on the five-yard line and the lights went out."

Corker acknowledged that with the health-care debate coming to a head and a push by the Obama administration to complete legislation ahead of the November midterm elections, Dodd is under pressure to produce a bill as soon as possible. Still, he said that trying to push such a complex bill out of committee before the coming recess "would be a travesty."

But Dodd, who announced his retirement in early January, said he needed to push forward to have any hope of fixing the flaws that remain in the financial system a year and a half after the 2008 market meltdown.

"I don't have a lot of time left in this Congress," said Dodd. "I think all of us who have been in this room and around the years know how this can go by very quickly."

Still, Corker said he would continue to work toward agreement on the remaining issues.

"What Chairman Dodd is going to do, probably, is introduce a bill on Monday that is a little to the left of where we were, to try to ensure that he can do as much as he can in the way of getting Democratic support on the committee," Corker said. "And then I think he will move to the right."

One of the major sticking points between Dodd and Corker has been the enforcement powers of the consumer watchdog, which is expected to be housed at the Federal Reserve in the forthcoming bill. Republicans want an elaborate appeals process to resolve conflicts between the consumer agency and regulators charged with keeping banks in good health. Corker said Thursday he thought the two sides had found consensus on the matter. But other government sources said that although Dodd had expressed openness to the idea, he never agreed to it.

Dodd is now expected to roll out a bill that is more in line with the Obama administration, which envisions a consumer agency with stronger enforcement powers. Dodd's staff is receiving proposals from Treasury officials for legislative language in areas where he could not find common ground with Republicans.

Some Democrats want to force GOP senators to publicly state their opposition to the consumer agency. Sen. Charles E. Schumer (D-N.Y.) said that if Republicans held back their support for Dodd's bill, he saw no reason to offer a compromise on the watchdog's enforcement powers.

"This would be a bad policy even if it were bipartisan," Schumer said. "But there's even less reason to accept a watered-down watchdog agency if those who insisted on it are prepared to walk away from the negotiations."

Dodd said he was fortunate to have a "strong partner" in Corker and that the updated draft would reflect the agreements he had reached with those on the right.

Several other elements of the bill also remained unresolved, such as the oversight of derivatives and reform of corporate governance rules. Congressional aides said these issues, however, were not expected to be significant roadblocks to a deal. If senators reach consensus on these issues, amendments can be added later, the aides said.

Even with the latest hiccup, senators maintained a measure of optimism Thursday.

Dodd insisted that "we're on a positive and optimistic track" in bringing financial overhaul to fruition.

"I still think we're going to get there," Corker said. "I think we are going to get there, but it's going to be far messier."

Staff writer Binyamin Appelbaum contributed to this report.

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