BLOG VIEW: Last November, when he was still a candidate for re-election, Sen. Chris Dodd, D-Conn., came out with a much-ballyhooed proposal to overhaul the financial services industry. The Dodd legislation ran a staggering 1,100 pages – in comparison, the Penguin Classics edition of Leo Tolstoy's ‘War and Peace’ runs 1,472 pages.
But whereas ‘War and Peace’ will be with us for as long as people are reading books, the Dodd legislation may soon see a significant chunk ripped out of its pages. That section refers to the Consumer Financial Protection Agency (CFPA), a new bureaucracy that was offered to replace the old bureaucracy that was supposed to protect the average consumer from being ripped off by their financial services partners.
Reports out of Washington have Dodd doing an about-face on the CFPA, with a new willingness to sacrifice its creation as a means of breaking the bipartisan bickering that repeatedly tripped up the efforts to pass anything that even vaguely resembled serious financial services reform. Should Dodd follow through and agree to scrap CFPA, it will be an astonishing turn of events.
Even if the proposed agency stays in the legislation, the fact that Dodd would even consider dropping CFPA is a huge victory for the financial services industry, which lobbied furiously against its creation. For an industry that appeared to have little lobbying muscle at this time last year, it more than proved itself capable of standing up for what it believed in. Likewise, it is a victory for Federal Reserve Chairman Ben Bernanke and the heads of the various regulatory agencies that opposed the concept of a CFPA – albeit for turf war concerns rather than perceived inadequacies in the proposal.
But on the flip side, Dodd's possible retreat is a blow for Rep. Barney Frank, D-Mass., who pushed for the CFPA (albeit in a heavily watered-down version) that was successfully voted on in the House of Representatives in December. If Frank was willing to fight for CFPA, even in a weaker version, why was Dodd ready to wave the white flag?
Dodd's possible reversal is also a blow to the Obama administration, which pushed for the CFPA, which may explain the hastily convened meeting last Tuesday between the president and the senator. The White House did not release the details of the meeting, and it is safe to assume that the administration was not happy with Dodd's actions.
Ultimately, Dodd's half-baked about-face is no surprise. At the risk of being cynical, it should be pointed out that Dodd came forth with his 1,100-page legislation last November, when he was facing the prospect of plummeting poll numbers back home. Dodd was the most vulnerable Democratic incumbent facing re-election, due, in large part, to the popular perception that he was much too close to the financial services industry, and the mega-legislation was clearly designed to reintroduce the five-term senator as a populist who was ready to fight for the common person.
Of course, that new persona failed to fool anyone in Connecticut. Faced with what appeared to be a very embarrassing campaign, Dodd abruptly withdrew from the race on Jan. 6. But since the populist image was no longer needed, it also appeared that the accessories that went with it could also be dropped. Thus, the 1,100-page legislation and its key provisions were no longer sacrosanct.
Furthermore, the split in the Senate between Democrats and Republicans has made it impossible to get anything passed without a heavy dose of compromise. This was clearly evident during the healthcare debate, and it should get only worse now that the Democrats' 60-40 filibuster-proof vote in the Senate was ruined by the special election of Scott Brown, the new Republican senator from Massachusetts.
Ultimately, the administration has not successfully sold anyone on the possibility that a CFPA will help spur a new wave of responsibility at the federal regulatory agencies. I might bet against it happening, particularly because there appears to be no great fear of retribution against anyone at the existing regulatory agencies who were derelict in their duties when the economic crisis was gaining steam.
Even if Dodd stops dithering and decides to push forward with the CFPA legislation, the fact that he would allow word of a possible retreat to leak shows a weakness in leadership and a lethal flaw in today's federal government. But, then again, why should we be surprised? Perhaps Tolstoy said it best: ‘Government is an association of men who do violence to the rest of us.’
– Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b]
[i] (Please address all comments regarding this opinion column to hallp@sme-online.com.)[/i]
