OTC MARKET NEWS Powered By Quantifi

Dodd-Frank Shows How Congress Can Overcome Deadlock 

June 30, 2013
Albert R. Hung, Bloomberg

Congress is leaving town, a cause for celebration across the land. Except that the lawmakers are going away only for the Independence Day recess; they’ll be back.

The branch of government endowed by the Founders with the most authority wins approval from only 10 percent of the public, according to a Gallup Poll in June. No major institution ranks as low.

The dysfunction on Capitol Hill is captured by one of the best books on the process in a long time, "Act of Congress,” by Robert G. Kaiser, a veteran Washington Post correspondent and editor. What makes the case more compelling is that Kaiser tells the inside story of one of the few successful legislative ventures of recent years, the 2010 Dodd-Frank Act, which overhauled the financial regulatory system after the 2008 crash.

Dodd-Frank, Kaiser writes, was an anomaly: “An accomplishment produced by a catastrophe and by the fear engendered by that catastrophe.”

Even under those circumstances, it only succeeded thanks to the extraordinary skill of its two sponsors: Barney Frank, the Massachusetts Democrat who was then chairman of the House Banking Committee and had a “capacious intellect” matched by few in Congress, and Chris Dodd, the Connecticut Democrat who headed the Senate Banking Committee and wielded “formidable” political skills.

Partisan Freeze

Given the magnitude of the crisis, it should have been a bipartisan bill. Some Republicans, such as Tennessee Senator Bob Corker and even a few veteran members on the two committees, were inclined to support it; their party leaders made clear they would become pariahs if they did.

Voters hate this kind of politics and say they want lawmakers to find common ground. Still, they are contemptuous of backroom deals, and that is how, unfortunately, common ground is found.

One of the best anecdotes in Kaiser’s book describes a one-on-one meeting between Frank and Camden Fine, president and chief executive officer of the Independent Community Bankers of America. Fine agreed not to oppose the Consumer Financial Protection Bureau, and, in exchange, Frank promised to lessen regulatory fees for smaller banks; the big banks would pay more.

It was a good deal for both sides -- the kind that doesn’t happen very often these days.

The debate was often superficial. Frank Luntz, a Republican media strategist, advised critics to call the measure a“bailout.” That became the mantra; it wasn’t the reality. (In the still unpopular rescue of Wall Street in 2008, which was a bailout, the government ended up making money, but that doesn’t fit on a bumper sticker.)

 

Read more at Bloomberg

 
Comments are closed on this post.

Subscribe

Submit your email to receive our newsletter

GO