05/23/2010 05:12 am ET Updated May 25, 2011

Dodd Move Blocks Progressive Reforms

With over 400 amendments readied for the committee debate on Senator Chris Dodd's financial reform package, Banking Chairman Dodd decided to ditch the democratic process and vote his own version of the bill out of committee. This moves the real debate to the Senate floor and worsens progressive's chance of improving the bill.

On Friday, Senators had readied their amendments which included dozens of Republican amendments that were clearly intended to draw out the debate and delay final action. After tweaking the bill over the weekend, Dodd moved for an up or down vote on his draft in committee. It passed on a strict party line vote 13-10. After a year of discussion, the committee "debate" and mark up took only 21 minutes.

Dodd said he was trying to avoid further partisan "polarization." Ranking republican Richard Shelby concurred with that view. "We're not going to the floor polarized. We're going to the floor right now in a spirit of trying to work a consensus bill, a meaningful substantive bill that I've said all along is what we need," Shelby said.

But a review of the amendments filed by both Democrats and Republicans indicated that not a lot of people on the Senate Banking Committee are happy with the Dodd draft.

Democrats had readied a dozen amendments to strengthen the bill including measures: to strengthen the Volcker Rule and the ban on proprietary trading, to create a truly independent stand-alone Consumer Financial Protection Agency, to impose maximum limits on leverage, to crack down on conflict of interest trading.

Republicans fielded hundreds of amendments to weaken the bill: to destroy the CFPA, to remove regulator's ability to oversee too big to fail institutions, to get rid of the industry-funded reserve to protect taxpayers from future bailouts, to weaken accounting rules and the like. The amendments also included a raft of date changes, a big bank delay strategy aided by Sens. Johanns, DeMint Vitter and Bunning.

Some will be sympathetic with Dodd's decision to move the bill to the floor and avoid a long drawn out fight, but it is clear that the move will also cost progressives. Now the
votes and the views of Democratic centrists once again take center stage.

At this point, the only slim hope of improving the bill is an alliance between progressive Democrats and key Republicans who are truly worried about too big to fail institutions and their death grip on the economy. There is no good way to "unwind" these systematically dangerous institutions, they must be prevented from growing too big to fail in the first place. Conservative Congressman Ron Paul (R-TX) and progressive Alan Grayson (D-FL) managed to create a successful alliance to champion an audit of the Federal Reserve that has made it into both the House and Senate version of the bill. Will a new right-left team emerge in the Senate to move reform forward? Stay tuned.