Scott Brown Will Oppose Wall Street Reform If Wall Street Is Taxed
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UPDATE - Tuesday - 12:15 p.m. - Sen. Scott Brown (R-Mass.), after securing a loophole in the final Wall Street reform bill, announced Tuesday that he would vote against it if it included a fee on Wall Street banks to pay for their own winding down. "I am writing you to express my strong opposition to the $19 billion bank tax that was included in the financial reform bill during the conference committee. This tax was not in the Senate version of the bill, which I supported. If the final version of this bill contains these higher taxes, I will not support it," Brown wrote to the lead conferees, Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.).
Negotiators may have to re-open the conference committee.
Scott Brown is trying to have it every which way. The Massachusetts Republican won a Senate special election earlier this year railing against "backroom deals" such as the Cornhusker Kickback and Louisiana Purchase. Now he's got his very own Bay State Buy-Off, having secured key exemptions for banks and insurance companies in Massachusetts.
His backroom deal secure, Brown is now threatening to vote against the final Wall Street reform bill on the floor. His spokesman said he may have a statement out later today, but until then, his Friday statement expressing skepticism stands.
Brown argues that fees and assessments that the bill requires banks to pay amount to a tax and that he has vowed never to vote for a tax increase. But without the fees, the bill would increase the deficit. "Here you have a person who ran on the teabag line -- the Tea Party line -- more than willing to increase the deficit and debt of the United States rather than paying for the bill," said a House Democratic aide involved in the crafting of the bill, noting that the bill's red ink was created because the GOP insisted on removing an ex-ante fund that it deemed a "permanent taxpayer bailout."
The fees Brown objects to would amount to three to four billion dollars a year, according to the Congressional Budget Office, far less than the annual bonus pools at the largest banks. The fees would be collected until the fund held roughly $20 billion. After 25 years, in a concession to Republicans, the fund would go toward reducing the deficit if it had not yet been used. "I've said repeatedly that I cannot support any bill that raises taxes," said Brown on Friday.
When senators seek carve-outs for specific home state firms, they generally speak about the provision they're seeking in general terms. Brown, however, has repeatedly told Capitol Hill reporters that he is looking out for Fidelity Investments, State Street and MassMutual, among other Bay State-based financial institutions.
Brown sought exemptions that would benefit those companies, as well as a loophole in the Volcker Rule that would allow firms to trade for profit three percent of their taxpayer-backed capital, which amounts to billions.
The importance of Brown's vote increased with the passing of Sen. Robert Byrd early Monday morning, temporarily depriving Democrats of a vote for reform.
Brown's vote had been needed earlier because Democrats Russ Feingold (D-Wisc.) and Maria Cantwell (D-Wash.) opposed the bill for not going far enough.
Feingold objected that the bill did not end the implicit policy that some banks are too big to fail. He has had scant involvement in negotiations over the past several weeks and Senate leaders have had little discussion with Feingold about whether his vote is still in play.
On Thursday, as the two biggest parts of reform still left to be debated -- the Volcker Rule and Blanche Lincoln's derivatives restrictions -- were being hammered out, Feingold was not involved in the talks, which led Democratic negotiators to bring in Brown instead, who demanded concessions.
HuffPost asked the second, third and fourth ranking Senate Democrats on Thursday what conversations they'd had with Feingold about his Wall Street reform vote.
"I haven't talked to him. I will. I just don't know" why he is still opposed, Senate Majority Whip Dick Durbin (D-Ill.) said. "I wanna talk to Russ. He's a very thoughtful person. I just don't know his reasoning."
"I have not spoken to him," said Sen. Chuck Schumer of New York, the third-ranking Democrat.
"I have not talked to him," said Washington's Patty Murray, the Senate's number four. "I've been in committee hearings all day, so I haven't had a chance."
Durbin said Cantwell was more engaged. "We're talking to. We are talking to her, although I don't know that she's made up her mind," he said.
Cantwell opposed the final bill because a specific change she requested was never made. While the bill called for nearly all derivatives trades that can be cleared to be cleared, there was no penalty for not clearing it and the trade would still be valid. For Cantwell, that meant derivatives reform amounted to little more than a polite suggestion. "Senator Cantwell and her staff have been very engaged on this. I'm not going to make a comparison of one or the other," said Heather Booth, head of Americans for Financial Reform of the opposition of Cantwell and Feingold. "She's very engaged and been very clear about what she wants."
Feingold, however, wanted more dramatic, general changes made. Booth argued that the smartest move for Feingold would have been to engage in the debate to try to make the Volcker Rule and Lincoln's reform as tough as possible, rather than forcing Democrats to compromise with Brown.
"We believe -- if the battle is going on today, with Merkley-Levin [a measure based on the Volcker Rule] and the Volcker Rule -- there are several provisions that provide an institutional impact on the structure riskiness and the size of the banks. Merkley-Levin is one, with Volcker, which'd mean that they can't spend money on risky trading," said Booth. A 716 proposal, even as Lincoln has clarified it, that the swap desks would be spun off into an adequately capitalized subsidiary, is a structural reform that effects size, riskiness and interconnectedness. There are also leverage requirements. All of this is in play right now."
Both, whose coalition represents unions, consumer groups and other progressive organizations, said that she and her allies have been pressing Feingold to get more engaged.
"Our belief is the concerns that Senator Feingold has raised are important concerns and we welcome him to be engaged in this battle to, even in his last week to ten days, to engage, and we need his support for the field of battle. We need the fight. We're not asking, 'Give us a vote on cloture or final passage'. We're asking him to join with us in this fight to engage, to work this through, to make this stronger. Get us a financial reform bill that adds to the security of the people of Wisconsin and the overall financial system."
Zach Lowe, a spokesman for Feingold, insisted that Feingold has been engaged in the debate by proposing solutions to the too-big-to-fail problem and supporting amendments that would have broken up the banks.
Lowe provided a statement from Feingold outlining his structural concerns. "During debate on the financial regulatory reform bill, I made it clear that I would only support a strong bill that can prevent another financial crisis. Neither the House bill nor the Senate bill pass that test. I have spoken to Senate leaders, the Obama administration, and members of the conference committee and made my concerns well known. I opposed deregulating Wall Street and eliminating the protections of the Glass-Steagall Act, a position which put me at odds with many in Washington who supported the very policies that contributed to the financial crisis, and who now support these bills that simply don't get the job done. Without including stronger reforms, we're simply whistling past the graveyard," reads the statement.
Feingold, noted Lowe, was one of four senators to oppose Riegle-Neal in 1994, which some observers say helped create the too-big-to-fail problem, and was one of eight senators to oppose the repeal of Glass-Steagall in 1999. When the next crisis comes, Feingold will be able to say he opposed the flawed reform that led to it. But that future claim will likely ignore the role his decision to oppose reform as early as he did played in driving Dems to cut a deal with Republicans, which led to the weakening that now makes the next crisis more likely.
Feingold has not commented on the final conference report, which can at this point only be tweaked to make technical changes. A spokesman for Cantwell said she is still reviewing the final report and is not ready to comment.
UPDATE: Politico's Meredith Shiner just spoke with Feingold, who told her he had been lobbied by Majority Leader Harry Reid (D-Nev.), but was disinclined to vote for cloture. "I'm not going to enable something that doesn't do the job to be passed so people can pretend it does," he told her.
UPDATE II: Feingold is now out with a statement restating his opposition. "As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee's proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up 'too big to fail' Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process," he said.
If all of the proposals cosponsored by Feingold had become law, however, there would still be no guarantee that the bill would -- or any bill could -- prevent another crisis.
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First Posted: 6/28/10 Updated: 5/25/11