Key lieutenants behind scenes ensured passage of financial regulation overhaul

By Renae Merle
Washington Post Staff Writer
Friday, July 23, 2010; A13

When Neal Wolin walked into the House speaker's office in December, landmark legislation to reshape the nation's financial regulations had been working its way through the House for more than six months. Top Obama administration officials had been confident the bill would ultimately pass the chamber, but a late challenge had emerged from centrist Democrats concerned about a provision that would give individual states more power to enforce consumer protection laws.

For decades, the question of how much of this authority the federal government should share with states has been a hot-button issue. And now a compromise solution was in trouble. With lawmakers preparing within days to head home for the holidays, House Majority Leader Steny H. Hoyer (D-Md.) and White House Chief of Staff Rahm Emanuel tasked Wolin, the second in command at the Treasury Department, with removing the obstruction to the bill's passage.

"Nerves were frayed, and everyone wanted to get this done," said Kim Wallace, head of legislative affairs at Treasury, who sat in on the last-minute talks.

The key players

This scenario played out repeatedly as the administration pushed for the new regulations. Behind President Obama's victory, crowned with his signing of the bill Wednesday, were a few key but little-known lieutenants who helped develop the strategy, waged a public relations campaign to fight off critics and negotiated last-minute deals to secure the bill's passage.

Key players include such people as Wolin and a team led by Michael Barr, the assistant Treasury secretary for financial institutions, along with Diana Farrell, the deputy director of the National Economic Council, who often weighed in with the White House perspective.

To resolve the impasse over state enforcement powers, Wolin negotiated with Rep. Melissa Bean (Ill.), the leader of the centrist caucus called the New Democrats, and others. The talks dragged on for hours. Hoyer shuttled between that meeting and an office nearby where House Speaker Nancy Pelosi (D-Calif.) and Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, were waiting for a solution. But after several hours of bargaining, no deal had been struck.

Hoyer then asked that Wolin and Bean be left alone.

About an hour later, the pair had found a middle ground, limiting the new enforcement authority states would get. The bill was able to pass the House soon after.

Wolin "does understand Washington better than anybody," said Treasury Secretary Timothy F. Geithner. "He understands how to make things work where the rubber hits the road."

Geithner and Lawrence H. Summers, Obama's top economic counselor, brought Wolin, Barr and Farrell together. They are an Ivy League trio known for their wonky discussions of the details of complicated legislation. Wolin and Barr both worked at the Treasury Department during the Clinton administration, while Farrell had been head of the McKinsey Global Institute, the economics research department of the consulting firm McKinsey & Co.

"They share information. There is no insecurity or competition between them. They respect each other," a senior administration official said.

The three spent hundreds of hours working with senior staff for Frank and Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, who were responsible for shepherding the bill in their respective chambers. But the trio sometimes were reluctant to make necessary compromises and had to be prodded by legislative allies to do so, congressional aides and industry lobbyists said. "You had to dial back policy to get the politics right. That is part of the normal process," said one congressional staffer.

The staffer and administration officials spoke on the condition of anonymity because they were not authorized to publicly discuss the deliberations.

Early steps

Their work began after Obama's inauguration, as the country was mired in an economic downturn, with daily meetings at the Eisenhower Executive Office Building next door to the White House. Wolin, 48, and Farrell, 45, worked with teams of dozens of other administration officials studying the causes of the financial crisis and potential solutions. Geithner and Summers had asked Barr, 44, initially to focus on how to structure a new, independent agency to protect consumers from lending abuses.

That assignment tapped into Barr's experience studying behavioral economics and other consumer issues as a professor at the University of Michigan Law School. Even before rejoining the government, Barr had helped the Obama administration develop a response to the housing crisis: a foreclosure prevention program that he would eventually lead as an assistant Treasury secretary.

Over time, Barr got more involved with other parts of the financial regulation bill, often working until midnight with a staff of more than a dozen lawyers hammering out the details.

Much of the action took place at standing-room-only sessions in Wolin's office, convened two or three times a day for nearly a year, in which the team traded information on how the bill was being received by various interest groups and developed strategy for responding to emerging attacks.

In March, with the legislation now awaiting action in the Senate, the team began to worry that television ads run by the U.S. Chamber of Commerce lambasting the bill were gaining traction with the public.

Wolin had been scheduled to speak at the Chamber's annual meeting in Washington and during his address vented the administration's frustration over the ads. Standing before banking executives and lobbyists, Wolin said: "That campaign is not designed to improve the House and Senate bills. It is designed to defeat them. It is designed to delay reform until the memory of the crisis fades and the political will for change dies out."

The speech received muted applause from a surprised audience, but administration officials believe it helped change the tone of the debate. It also helped cement Wolin's image as one of the administration's chief enforcers.

The odds change

That same week, the bill appeared headed for one of its toughest tests, with the Senate banking committee due to take up the measure. Republicans had submitted nearly 400 amendments, and if many were taken up they could have dragged out progress on the bill for weeks. And the price Democrats might have paid for committee approval could have been painful concessions on key provisions.

Farrell and Wolin spent the weekend before the committee hearing preparing the arguments that Democrats would muster to counter possible amendments. "We spent all weekend furiously trying to analyze each one, understand them," Farrell said. Barr weighed in from Ann Arbor, Mich.; he took a flight home every weekend to spend time with his family.

But by early the next week, word had begun to spread that Republicans on the committee might not offer any amendments after all but simply register blanket opposition by voting against the measure. Just in case of trouble, Farrell, Wolin and Barr went back to Capitol Hill ahead of the hearing to confer with their Democratic allies.

Barr stayed as the hearing began, sitting behind the Democratic committee staff, prepared to offer arguments against potentially damaging amendments. Farrell and Wolin returned to their offices to watch the proceedings on C-SPAN.

In less than 30 minutes, the proceedings were finished with no Republicans amendments offered.

"I thought, 'Did I just miss something?' " Farrell said. "And immediately we're all on the phone: 'Did you just see what I saw?' "

Democrats -- and even some Republicans -- later said the GOP had missed perhaps its best chance to thwart some of the administration's ambitions and shape the legislation, which would pass the full Senate weeks later.

Farrell ran into the office of her boss, Summers, to share the news. "We just thought, now this has really, really changed the odds," she said.

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