WASHINGTON — Even as top Senate Banking Committee leaders appear close to striking a final compromise on a regulatory reform bill, some Democrats continue to try and push the legislation further to the left.
A small but vocal faction of liberal Democrats are leading a charge to add more-onerous requirements to the bill, including restoring the wall between securities and banking and capping financial institution size.
"There are a series of things that we should be doing that are not in the bill," Sen. Ted Kaufman, D-Del., said in an interview this week. "In order to be really sure that we've ended 'too big to fail,' I think the first step to do that is to reimpose Glass-Steagall. … The next step is the bill I've co-sponsored with Sherrod Brown which sets up caps on liabilities — it says essentially that banks couldn't be over a certain size."
Kaufman introduced a bill this week that would limit a bank holding company's share of the nation's insured deposits at 10%. (Currently companies are not allowed to acquire other institutions if doing so puts them over that cap, but they are allowed to grow organically beyond it.)
The bill would also limit the nondeposit liabilities, including ones off the balance sheet, of any bank or thrift holding company at 2% of gross domestic product. It would also mandate a 6% leverage limit for bank holding companies and selected systemic nonbanks.
Overall, Kaufman said, any reform bill must leave less responsibility in the hands of regulators who failed in the run-up to the crisis. His bill, he said, "goes to a different philosophy than letting the regulators take it over. The regulators essentially had the power before to do a lot of these things and they didn't do it."
Other, similar attempts are in the offing. Sen. Chuck Schumer, D-N.Y., has said he would like to add a controversial large-bank tax to the reform effort, and Sen. Bernie Sanders, I-Vt., has said he will offer or support amendments to impose a 30% rate cap on credit cards, audit the Federal Reserve Board and break up large banks.
Whether any of these provisions stands a chance when the reform bill comes to a vote next week is unclear. Banking Committee Chairman Chris Dodd seems committed to compromise, but many analysts said Democrats have enough momentum to push some tougher requirements into the bill.
"There is a sense with a lot of the liberal members that they are just at the breaking point themselves," said David Min, an associate director for financial markets policy at the Center for American Progress. "You've seen efforts by some to move it further to the left. There was the Sherrod Brown bill. And I think you'll see more of that."
Democrats clearly feel that the tide has turned in their favor. President Obama made a final push for the bill during a speech in New York Thursday, rebutting Republican criticism of the legislation.
"We've seen misleading arguments and attacks designed not to improve the bill, but to weaken or kill it," Obama said. "And we've seen a bipartisan process buckle under the weight of these withering forces, even as we have produced a proposal that is by all accounts a common-sense, reasonable, nonideological approach to target the root problems that led to the turmoil in our financial sector."
Still, Obama urged both sides to back the bill and act in a bipartisan fashion. "We can and must put this kind of cynical politics aside."
But top Senate Democrats — Majority Leader Harry Reid, Sen. Dick Durbin and Schumer — did not appear to be in a bipartisan mood Thursday. The three replayed footage showing Senate Republican Leader Mitch McConnell arguing last week that the bill would lead to endless bailouts and showing Republican Whip Jon Kyl claiming that a proposed consumer protection agency would harm dentists and optometrists.
"Republican leadership has so far decided to be against reform, to in fact kill reform," Reid said. "But the facts and the American people are on our side. … I'm trying to figure out why they've chosen this fight. Maybe their friends on Wall Street are asking them to protect their bloated bonuses."
Regardless of their past claims, Republicans in recent days have appeared much more optimistic about reform, even though little appears to have changed with the underlying bill. After Reid filed a motion Thursday to proceed with debate on the bill, McConnell objected, saying he wanted to give Dodd and Sen. Richard Shelby, R-Ala., more time to reach an agreement.
"Is it too much to ask, that should an agreement be reached, that we take the time to make sure every member of the Senate and our constituents can actually read the bill and understand the details?" McConnell said on the Senate floor. "My impression was that serious discussions were going on, I think they should continue; therefore … I object."
But many observers said Democrats will continue to gain the advantage. "The Democrats got the high ground on this thing and the Republicans are losing public support. The big banks are furious," said Paul Miller, an analyst with FBR Capital Markets.
Dodd appeared more worried Thursday about how to deal with new potential problems. The Congressional Budget Office said this week that the bill would save the government $21 billion over 10 years, largely because of the creation of a resolution fund for systemic banks that would be based on assessments of the biggest institutions.
But Republicans have pressed to remove that fund. While Dodd was leaning toward doing so, such a move may mean the bill costs the government money.
"There are always new wrinkles," he said. "The $50 billion fund — if you take it out — it changes the numbers. I've got to rethink that a little bit and I think a number of Republicans have the same concern."
