Getting Wall Street reform back on track

GETTING WALL STREET REFORM BACK ON TRACK…. They didn’t want to, but congressional Democrats re-opened the conference committee on Wall Street reform yesterday afternoon, to make one key change: how to pay for the regulatory overhaul. The move became necessary when Sen. Scott Brown (R-Mass.) announced he was prepared to kill the entire legislative package over a small bank fee.

Conference committee members met, and in fairly short order, made the changes that should deliver the needed votes.

Conference negotiators voted to eliminate the proposed tax and adopted a new plan to pay the projected five-year, $20 billion cost of the legislation.

The new plan would bring an early end to the Troubled Asset Relief Program, the mammoth financial system bailout effort enacted in 2008, and redirect about $11 billion toward heightened regulation of the financial industry.

The conferees also voted to increase the reserve ratio of the Federal Deposit Insurance Corporation, but specified that small depository institutions — those with less than $10 billion in consolidated assets — be exempt from paying any increase.

They also voted to permanently set the maximum deposit insured by the F.D.I.C. at $250,000 per account, a change that would further raise the amount banks must pay toward the coverage.

The partisan dynamic was a little awkward — Democrats were voting to approve changes to satisfy some Republicans (Brown, Snowe, and Collins), while Republicans on the conference committee voted to reject the same changes because they oppose the entire legislation. In other words, Dems were making changes demanded by Republicans, which were then opposed by Republicans. House Financial Services Committee Chairman Barney Frank (D-Mass.) described himself as being “caught in the middle of an intra-Republican debate here.”

It’s also worth noting the oddity of the “moderate” Republican demands. Under the original financing mechanism, a modest fee would be imposed on banks over the next five years. To satisfy Brown, financing will now largely come from a shut-down TARP system. In effect, Brown insisted that the Wall Street reform initiative itself is paid for by taxpayers, instead of by banks.

But, you know, he sort of drives a truck, so he must be a man of the people.

In any case, unless Brown, Snowe, and Collins find a new complaint — with these folks, you just never know — yesterday afternoon’s “fixes” seem to satisfy their concerns. Their votes would bring the total to 59, and if Sen. Maria Cantwell (D) of Washington votes with her party to overcome a Republican filibuster, Wall Street reform will be on track for final passage.

Indeed, the House is prepared to move forward with its final vote as early as today. Given GOP delaying tactics in the Senate, it’s unlikely the other chamber will wrap this up before the July 4th break, but most insiders seem to believe passage won’t be too big a problem when senators return.

Kevin Drum had a good item overnight on the bill, highlighting several of its key provisions. He concluded, “Given the alternatives, anyone who cares about financial reform should support this bill.”