Democrats Set Showdown Vote On Wall Street Bill
STEVE INSKEEP, host:
So that's the public game. And now let's go to Washington for a look at the private game. The Senate is still divided on the financial regulation bill. Senate Majority Leader Harry Reid plans a procedural vote on Monday and says he is ready to begin formal debate. Republicans are still objecting.
To learn more about the bill's prospects, we spoke to Stacy Kaper, who's been covering the legislation for the publication American Banker.
Ms. STACY KAPER (Journalist, American Banker): For all of the rhetoric and all of the fighting and finger pointing on both sides, there's very, very little difference between what each party is really fighting for at this point. I spoke with a former aide to Senator Richard Shelby, who's the top Republican negotiator, and he essentially described the debate as they've bought the house, now they're arguing over what color to paint it.
INSKEEP: What does it do? As best you can determine, what are the basic things that this bill will do on Wall Street?
Ms. KAPER: Well, the essential framework of the bill is the idea that they want to have all of the financial regulators working collaboratively together to be viewing the system as a whole, and not just have a very limited part of one specific part of one institution.
INSKEEP: The FDIC looking at this, the SEC looking at something else, the Fed looking at something else, that sort of thing.
Ms. KAPER: Precisely. The idea is they really want to insure that regulators are not so focused on when one tiny part of one institution that they're missing broad systemic problems happening throughout.
Now, as far as Wall Street goes, beating up on the big banks has become a very, very popular talking point on both sides. And you've seen some surprisingly strong pieces of the bill survive. One would be the so-called Volcker rule that is still in the legislation, was not expected to make it this far, that would say if you're a large financial institution, one of the big banks that became -or investment banks that became a bank, you can no longer do proprietary trading.
This week, you saw the Senate Agriculture Committee report out a bill that even had one Republican on it which would say if you were a large financial institution, you cannot have your swaps trading desk, your derivatives desk, within the bank. You would have to spin that off and have that into some other part of the institution.
INSKEEP: Oh, because there's too much conflict of interest. If you've got someone who's trading and basically betting on an investment to fail at the same time that the same institution is selling that investment, that's no good, basically.
Ms. KAPER: It was surprising to see that very strong provision survive this far.
INSKEEP: Would that be a big deal if that amendment passed?
Ms. KAPER: Oh, it would be a huge deal. I mean, 85 percent of the derivatives transactions, approximately, are done by the largest financial institutions within the institution themselves. It is unclear if that strong of a reform would actually last in the final bill, but, you know, one analyst said this week, usually, the model is legislation gets weaker as it goes through the Senate. That model's broken. It's hard to see where this goes at this point.
INSKEEP: Is there some big idea in financial reform that is out there that has just been kept out of this bill because of strong lobbying?
Ms. KAPER: Well, it's hard to say if it's because of strong lobbying or because of ideological points of view or philosophical points of view, but there are some academics, some analysts, and even some lawmakers who have said, really, if you want to end this too-big-to-fail debate, if you want to prevent a large financial institution from having the potential to be bailed out by the government, you have to break it up.
You have not seen that get into the legislation at this point. Some more liberal Democrats have said they plan to offer these as amendments in the broader Senate, hoping that they will be attached to the legislation to break up large institutions.
Senator Kaufman from Delaware said this week that he expects three years from now, we will be coming back to this debate, and we will go back to imposing Glass-Steagall, which completely walled off investment from commercial banking, retail banking. He predicts that, really, this is just a stepping stone in the legislative process, and we're really going to have to go far further to seriously address the problem.
INSKEEP: Stacy Kaper of American Banker. Thanks for coming by.
Ms. KAPER: Thank you.