Financial overhaul efforts likely to get boost from Dodd’s retirement plans

Sen. Chris Dodd’s planned retirement increases the likelihood of financial
overhaul legislation passing this year, industry lobbyists and consumer
activists say.

Dodd (D-Conn.) decided to remain chairman of the Senate Banking Committee last year in part to oversee wide-ranging changes to how the nation’s financial system is regulated.

{mosads}But Dodd’s panel has yet to mark up legislation, even as the House in December passed a broad overhaul of the industry.

With Dodd’s retirement, which was announced Wednesday, special interests on both sides of the fight believe the momentum has shifted in favor of passing legislation well before the 2010 elections.

White House Press Secretary Robert Gibbs said Dodd is a “passionate advocate” on financial overhaul and aims to finish this year.
 
“I think the odds of enactment are greater now than before,” said Richard Hunt, president of the Consumer Bankers Association.

“The political roadblocks won’t matter anymore and Dodd can just get down to policy,” said Ed Mierzwinski, director at U.S. PIRG.

Dodd and Sen. Richard Shelby (R-Ala.), the ranking member on the panel, have been trying to craft a compromise since last year. Senators from both parties are trying to ease disagreements over many details of the overhaul.

The overhaul would include major changes to the nation’s regulatory structure, the power of the Federal Reserve, oversight of the multi-trillion-dollar derivatives markets and changes to how consumer products are regulated.

Dodd and Shelby have worked closely in the last few years on financial legislation, particularly on a credit card bill in 2009.

Dodd said on Wednesday he is in favor of reaching a bipartisan framework for reform. And financial industry lobbyists believe that his retirement makes that more likely.

“If anything, his announcement makes it easier to craft a bipartisan bill,” said Scott Talbott, senior vice president at the Financial Services Roundtable.

The thorniest question for Dodd and Shelby remains how to boost consumer protections.

For the administration, House Democrats and consumer advocates, a cornerstone of the overhaul is the creation of a new Consumer Financial Protection Agency (CFPA). The agency would regulate financial products, including mortgage loans and credit cards.

Dodd has been a strong supporter of a new agency. But Shelby and other Republicans strongly oppose it, as does the financial industry.

Dodd is facing major pressure from consumer advocates to support the new agency.

“In some ways this frees him up to speak his mind, knock a few heads and do what he thinks is right including hanging tough on the CFPA,” said Travis Plunkett, legislative director at the Consumer Federation of America.

Heather Booth, head of Americans for Financial Reform, a coalition of consumer advocates and labor unions, said the next month is crucial in the CFPA debate.

“We’re intensifying efforts,” she said. “We think it’s important that people see this is a dividing line issue moving into the elections.”

Financial industry lobbyists believe just the opposite — that Dodd’s retirement allows the CFPA to fall by the wayside. They argue that there simply are not the 60 votes necessary to break a filibuster over the new agency.

Hunt said the Dodd announcement “puts the nail in the coffin” of the agency as Obama proposed. Industry groups supported an alternative in the House that would have created a council of regulators but not an independent agency.

“The votes are not there,” Hunt said.