Senator Blanche Lincoln (D-Ark.) is the chair of the Senate Agriculture Committee and a key vote on derivatives reform. She's also taken $1.2 million in contributions from the finance, insurance and real estate sector over the past five years. Consequently, she doesn't really want to reform the derivatives market too significantly. And if all goes according to plan, she won't!
Nevertheless, in the wake of her getting pushed into a runoff against insurgent Democrat Bill Halter in the Democratic Party primary for her Arkansas Senate seat, her campaign has put out an ad touting her as someone who is "standing firm" against Wall Street.
And if you do what Lincoln's done here -- chopped and screwed a bunch of news reports to cast her in the best light -- it's a pretty convincing case.
It's very clear that [Senator Maria] Cantwell [(D-Wash.)], not Lincoln, was the driving force behind the derivatives title. According to Business Week, Lincoln couldn't even defend her own derivatives proposal at a Democratic caucus meeting, and Cantwell had to step in and bail her out. Lincoln was clearly fed the strong language, when she was planning a much weaker proposal with Saxby Chambliss (R-GA), to project an image of a populist Wall Street reformer for her suddenly tough primary challenge from Bill Halter.
The very night of the election, Chris Dodd filed an amendment to cancel out the strongest part of the title, Section 716, which would force the big banks which accept depositor insurance and cheap money from the Fed to spin off their lucrative swaps trading desks so that casino gambling activities aren't subsidized by taxpayers. When it became clear that Lincoln would head to a runoff, Dodd withdrew his amendment.
But that doesn't mean Section 716 will become law. Indeed, Economics of Contempt, a structured finance lawyer with a lot of back channels to the big banks, is certain it won't (excuse the editorializing in this excerpt, focus on the certitude).
I know the banking industry is going to freak out about the fact that Blanche Lincoln's disastrous Sec. 716 is still in the bill, but they shouldn't sweat it. It will get stripped out in conference -- everyone (save for Blanche Lincoln) recognizes that Sec. 716 simply cannot become law. Dodd knows what he's doing.
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