One obvious question when Connecticut Senator Chris Dodd announced his retirement last week was what impact it would have on the effort to reform Wall Street. Dodd is chairman of the Senate Banking Committee, and the bill he wrote last year is the most ambitious regulatory initiative pending in Congress. Anything that changed Dodd’s calculus could have huge implications, which is why I was intrigued by a headline in the following day’s Wall Street Journal proclaiming that, “Dodd's Retirement Muddles Financial Overhaul.”
As it happens, the announcement really did create a muddle, since it raised two separate questions that are easy to confuse: 1) Does Dodd’s looming retirement make a so-called reg reform bill more likely to pass this year? 2) If a bill does pass, will it be tougher or weaker than it would have been if Dodd were running for re-election? The problem is that the Journal piece only added to the confusion by providing answers that suspiciously benefit reform opponents. It’s as though the Journal was trying to construct a narrative that could derail the Democratic agenda. And it’s not the only time it’s happened lately.
But back to Dodd for the moment. On the first question--is a bill more likely to pass?--the answer is almost certainly yes. On the one hand, Dodd, who faced an uphill re-election fight thanks to his perceived closeness to the financial industry, no longer has the same political incentive to demonstrate his anti-Wall Street bona fides. On the other hand, Republicans were in no mood to give Dodd a victory in the middle of a tough re-election fight. It’s unlikely they’d have played ball even if Dodd wanted to. Now, one would expect them to ease up a bit.
Most of the coverage of Dodd’s retirement reflected this conclusion--like the pieces that ran in The Washington Post and on the Associated Press. But the Journal story suggested a reg reform bill would now be less likely. “With the party's political difficulties increasing,” the paper observed, “its appetite for controversial legislation, already weak in an election year, has shrunk even further.”
As for the second question--will a bill, if it passes, be tougher or softer?--that’s much harder to say. For one thing, Dodd would have had to compromise significantly in order to pass a bill even if he were running for re-election. (There’s no way the hard-nosed bill he authored could get 60 votes in the Senate.) Relative to that baseline, one could imagine the bill getting even more industry-friendly--maybe Dodd was posturing and was never as hawkish as his original bill suggested. But one could also imagine the final bill ending up tougher than it would have. After all, Dodd no longer has to worry about raising money from Wall Street for his re-election campaign. And for both personal and biographical reasons--which my colleague Suzy Khimm enumerated in this great piece--Dodd seems keen to bolster his legacy and redeem his personal reputation, which took a hit after he received a special mortgage deal from Countrywide Financial. (Dodd says he wasn’t aware that the terms of the mortgage were preferential.)
The point is that, depending on how you (or, more importantly, Dodd), weights these considerations, the second question could go either way. Once again, most of the coverage reflected that uncertainty. For example, the AP noted that Dodd was now free to “cut a deal with Republicans without fear of alienating liberal voters” (a tug rightward) but also freer from “the influence of financial sector executives and hedge fund managers who have regularly filled [his] campaign treasury with donations” (a tug leftward).
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