[Peace-discuss] IL Congresswoman tool of banks?

[C. G. Estabrook]

	Frank gets moderates to relent
	By: Victoria McGrane
	October 20, 2009 04:45 AM EST

Moderate Democrats — always courted and often feared in big roll call votes in 
the House — have backed down from a key fight over financial reform.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has persuaded 
a bloc of moderates to withdraw an amendment that would have watered down a 
consumer protection agency bill and shield banks from tougher state laws.

Rep. Melissa Bean (D-Ill.) agreed to pull her amendment with a promise that 
Frank would continue to work with her to change the bill, though when that 
change would be made remains uncertain. This amendment, which would have allowed 
potentially softer federal financial rules to pre-empt individual state laws for 
banks, was a priority for moderates and the financial industry but was 
vociferously opposed by consumer advocates and liberals.

In backing down during this week’s committee markup, moderates are giving Frank 
the power to craft a consumer financial protection agency bill that would grant 
the federal government a much stronger hand in cracking down on banks.

This concession by moderates — even if it’s temporary — is the latest move by 
centrist Democrats to back down in the face of pressure from their more liberal 
leaders and chairmen. Moderates relented earlier this year on a much stronger 
cap-and-trade energy bill, and the centrists in the House are looking more and 
more like they’ll have to deal with a public insurance option on health care.

Frank’s panel is expected to add back a lesser degree of federal pre-emption to 
the bill, but it’s not nearly as big of a change as Bean was seeking.

On the financial reform bill, Bean’s decision to withdraw her amendment is a 
major loss for big banks and financial institutions, which are getting spanked 
hard by the House on financial reforms. Last week, big banks lost key battles on 
derivatives legislation and watched helplessly while community banks won 
exemption from CFPA’s enforcement, at the expense of larger financial institutions.

The big banks have focused much of their lobbying against the CFPA on preserving 
this so-called federal pre-emption of state consumer laws that they currently 
enjoy.

Bean’s amendment — which observers say had the votes to pass Frank’s committee — 
was “one of the only hopes that we have right now on this issue” in the House, 
as one Democratic lobbyist for the financial industry said.

“It’s not been a good couple months for the large banks; this is a continuation 
of that story,” said Brian Gardner, a bank analyst with Keefe, Bruyette & Woods.

But financial industry officials are grumbling that some of the blame rests with 
the moderate House Democrats who say they’re for pro-business policies but don’t 
seem to be able to deliver on those principles. Bean and the five co-sponsors of 
her amendment are all members of the centrist New Democrat coalition, a group 
that has 15 members on the Financial Services Committee and has worked to 
position itself as a major force on the financial reform legislation in the House.

But some financial officials question the wisdom of not forcing more issues in 
committee, arguing that it’s much harder to secure legislative changes on the 
House floor. One Democratic lobbyist said that New Democrats’ ability to force 
real change to the CFPA and derivatives bill on the floor will be “do or die for 
the New Dems as a force in the House.”

“This is the just the beginning of the legislative process. Industry should 
buckle down and deal with their own public relations crisis instead of trying to 
deflect it on to the New Dems,” a senior aide to a New Dem leadership member 
shot back.

Frank was worried that Bean’s amendment could sink the bill, Hill and K Street 
sources say. Republicans on the committee had publicly announced their plans to 
support the Bean amendment, guaranteeing its passage, but have no plans to 
support the underlying bill. But several liberal members of the panel vowed to 
oppose the final bill if it contained the Bean language, and Frank worried that 
these complications could derail the whole bill.

Frank asked Bean for help in moving the bill out of committee by delaying the 
debate on pre-emption until after the committee vote, and Bean did not want to 
let “Republican gamesmanship” kill the underlying bill, said the Democratic aide.

With Bean relenting, the bill that emerges from committee will be much more 
aggressive, giving states with much tougher consumer protection laws more power 
to scrutinize banks.

“If this gets painted as a very strong bill that comes out, then they’ve got a 
lot of maneuverability to pull back from that,” said Mark Calabria, director of 
financial regulation studies at The Cato Institute and a former Hill banking 
staffer. “The last thing that [Frank] wants is for this to be painted as a bill 
that gives everything away to the banks.”

Frank is also girding for eventual negotiations with the Senate, which most 
believe will produce a much more conservative package of financial reforms than 
the Obama administration has proposed.

The White House and Treasury have argued vocally against Bean’s proposal for 
making federal powers trump state powers on bank regulations.

“Washington doesn’t always know best,” Assistant Treasury Secretary Michael Barr 
told reporters last week. “It’s absolutely critical that we have a high national 
standard that ... is a floor, not a ceiling on state activity.”

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