Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Detroit News, the Guardian, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndrewKroll.

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Wall St. War to Senate Floor

| Mon Mar. 22, 2010 6:01 PM EDT

In a brisk, no-frills 20-minute session, Sen. Chris Dodd's version of a sprawling financial reform bill was passed by the Senate banking committee—13 Democrats to 10 Republicans—and moves on to what will surely be a legislative war on the Senate floor. Today's mark-up session by the banking committee was meant to be a debate among committee members over nearly 400 amendments to Dodd's original bill (PDF), released last week. But lawmakers instead approved a manager's amendment to the bill, which makes a number of technical and rhetorical tweaks to Dodd's bill, then voted on the bill entirely, knowing that a Democratic majority would pass it and set up the real debate in the Senate.

There was an anticlimactic feeling surrounding the event, and a few senators, including several Republicans, didn't even show up to the mark-up and voted by proxy. Sen. Bob Corker (R-Tenn.), a top GOP negotiator on the Dodd bill before talks broke down, had hinted earlier today that a low-key vote would happen, and predicted that the Senate would take up the bill after Easter. "It's probably true that we have a better opportunity with a different cast of characters, the full Senate, to do something that is sound policy-wise," Corker told CNBC today.

The quick vote today is undoubtedly an indication that senators handling financial reform didn't want a health care-like battle in committee. For months, health care talks were bogged down in the Senate finance committee, between Sen. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa), but by skipping over contentious amendments today, Dodd and his colleagues bypassed a several weeks' worth of infighting. The mark-up today marked a shift in GOP tactics more than anything. At several points in the meeting, Dodd, the banking committee's chair, asked GOP counterparts whether they wanted to make any statements or comment on the bill, but those in attendance all declined but for brief remarks by Shelby, the ranking member. Bypassing the committee negotiations was clearly a decision made by Senate Republicans to fight it out on the Senate floor, where the Dems enjoy a slim majority but Republicans have gained momentum. The Senate floor is also a more visible, high profile venue—center court, if you will—to lay out their hundreds of amendments.

Those amendments range from watering down an independent consumer agency to declawing a council of regulators that would guard against systemic, AIG-like risk. So while today's brief affair might've brought the negotiations to prime time sooner, all those amendments will still see the light of day in a few weeks. The battle over Wall Street is still coming. 

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Dodd to Ram Through Finance Bill?

| Mon Mar. 22, 2010 1:30 PM EDT

Sen. Bob Corker (R-Tenn.), a top GOPer in the Senate's financial reform talks, told CNBC today that the committee charged with drafting a comprehensive Wall Street overhaul could ditch the negotiations and amendments process and vote on the bill as early as today. Nearly 400 amendments to the Dodd bill had been offered by Democrats and Republicans on the Senate banking committee over the weekend, but those all appear to be forgotten now. The move to vote now in committee, where there's a partisan split on the financial bill drafted by committee chair Sen. Chris Dodd (D-Conn.), sets the stage for a negotiations to take place in the full Senate, which won't take up financial reform until next month. "You'll have Easter recess, and that's when, I guess, over the course of the next several weeks when the real negotiations will be taking place," Corker said. "It's probably true that we have a better opportunity with a different cast of characters, the full Senate, to do something that is sound policy-wise."

The move to bypass committee-level negotiations and go straight into the full Senate, provided the bill gets out of the banking committee, will open financial reform up to a divided Senate already bogged down with its legislative agenda. Many of the amendments offered within the banking committee over the weekend—by turns to weaken and strengthen a new consumer protection bureau, kill a council that would tackle too-big-to-fail issues, and bulk up shareholder input on executive compensation—will likely emerge in the full Senate's debate, where Democrats will try to beef up Dodd's bill, introduced last week, and GOPers will fight an independent consumer agency and other expansions of government authority in the bill. At least one senator on the banking committee held out hope the bill could garner bipartisan support. "There is no choice other than a bipartisan compromise solution," Sen. Evan Bayh (D-Ind.) told CNBC.

Wall St. Reform's Death by Study

| Mon Mar. 22, 2010 11:24 AM EDT

When Sen. Chris Dodd (D-Conn.) unveiled his financial reform bill last Monday, among the numerous reforms included—an independent Consumer Financial Protection Bureau, greater say on executive compensation, a risk council created to prevent too-big-to-fail situations—was a version of what's called the "Volcker Rule." Named for the former Federal Reserve chairman Paul Volcker, the rule in Dodd's bill would ban insured banks from engaging in risky proprietary trading (i.e., trading for their own gain, as opposed to trading for their customers—a practice rife with conflicts of interest) and sponsoring casino-like entities like hedge funds and private equity funds. But there was a rub: Instead of mandating the "Volcker Rule," Dodd's bill requires a six-month study by the newly created financial risk council, after which the council will recommend whether or not to implement it. That study, as some observers see it, would more likely kneecap or kill the Volcker Rule than anything else.

A look at the nearly 400 amendments offered by senators on the banking committee, which begins marking up the bill this evening, shows the Death-By-Study strategy could become a tool to blunt financial reform. Sen. Richard Shelby (R-Ala.), the top GOPer on the banking committee, is the king of the study so far, judging by nine study-related amendments he's offered. Among others, he's requested studies to replace: the SEC's rulemaking power on arbitration, mandatory pre-dispute arbitration, and the Volcker Rule. Sen. Kay Bailey Hutchison (R-Tex.), in addition to requesting an exemption for banks with $150 million or less in assets from the Sarbanes-Oxley Act, which tightened accounting and disclosure standards for public companies, wants a study to see whether banks with $700 million or less shouldn't be exempted, too. An amendment offered by Sen. Bob Corker (R-Tenn.) would move an existing bankruptcy study in the bill from the tough, independent Government Accountability Office to the financial risk council, which is headed by top financial regulators.

That's not to say all proposed studies are intended to blunt the bill. One of Dodd's amendments would require the GAO to study the "Repo 105" accounting gimmick, a trick used by Lehman Brothers to cook its books and make it look healthier than it really was. Another study, by Corker, would require the GAO to study the government's role in propping up the troubled housing twins, Fannie Mae and Freddie Mac, a backstopping effort costing the government $125 billion.

But on the whole, as the banking committee begins tweaking and changing Dodd's financial reform bill (which we'll be covering here), keep an eye on any suggestions to replace mandatory rules or authority with "studies." Those studies could be just another way for the bill's opponents to punch holes in what's currently a relatively tough piece of legislation. And if they succeed, the bill could emerge from committee looking more like a piece of Swiss cheese than a Wall Street overhaul.

Warren Buffett Safer Than Obama?

| Mon Mar. 22, 2010 10:32 AM EDT

Bloomberg News reports today that, according to the bond market, you're safer investing in Warren Buffett than in what used to be the safest of all bets—the US government. The yield on bonds offered by Buffett's storied Berkshire Hathaway last month had a yield that was 3.5 basis points, or 0.035 percent, lower than the US government's Treasury bonds—essentially American debt. Joining Buffett in the safer-than-US-debt category as well were bonds for household names like Proctor and Gamble, Johnson and Johnson, and Lowe's, the home improvement store. "It's a slap upside the head of the government," one financial officer told Bloomberg.

So what's it mean? For one, that the US is selling massive amounts of Treasury bonds—$2.59 trillion since the start of 2009—to borrow money to finance its projects like the stimulus package, bailout, wars in Iraq and Afghanistan, and Obama's other projects. So much money, in fact, that the US will pay 7 percent of revenues to service its debt this year, according to Moody's rating service. According to the Congressional Budget Office, the federal budget proposed by Obama will create record deficits of more than $1 trillion this year and next, and the total deficit between 2011 and 2020 would reach $9.8 trillion, or 5.2 percent of GDP. The US' looming debt crisis is getting so bad and threatening to swallow so much money that Moody's said earlier this month that the US was "substantially" closer to losing its AAA debt rating, the gold standard of bond rating.

From a strictly financial standpoint, the Buffett-Obama comparison highlights just how grim the US' fiscal situation is. It's one thing to borrow deeply to try to create jobs, backstop an ailing housing market, and restart the American economy. But on the morning after the passage of a historic health care bill, the Bloomberg story nonetheless offers a rude awakening as to how deep in debt this country really is.

Wall St. Bill Faces 400 Changes

| Sun Mar. 21, 2010 4:59 PM EDT

More than 400 amendments will likely be proposed beginning this week to change the Senate's financial reform bill, many of them in an effort to whittle down the relatively strong Wall Street overhaul offered by Sen. Chris Dodd (D-Conn.), chair of the banking committee. 110 of those amendments, according to a Senate document describing the amendments obtained by Huffington Post, come from Sen. Richard Shelby (R-Ala.), the top GOPer on the banking committee, who failed to reach a bipartisan agreement with Dodd last month. Almost a hundred more come from Sen. Bob Corker (R-Tenn.), whose talks with Dodd broke down earlier month despite reaching the "five-yard line," according to Corker.

The amendments range in scope and ambition. Some would bulk up Dodd's bill, like Sen. Jack Reed's amendment to make a new consumer protection agency independent and standalone (Dodd's version makes it independent, but houses it within the Federal Reserve). Others would weaken or radically alter what Dodd offered. Shelby, for instance, submitted an amendment calling for the merger of the Securities and Exchange Commission with the Commodity Futures Trading Commission. Another of Shelby's would strip a new Council of Regulators, designed to spot and tackle too-big-to-fail institutions, of the power to implement tougher rules for non-banks and bank holding companies, like Goldman Sachs and Morgan Stanley. One of Corker's would ban securitizing subprime mortgages altogether.

Further amendments push for "accountability and transparency reforms at the Federal Reserve" from Sen. Jim Bunning (R-Ky.), a demand that President Obama report to Congress on potential reforms of housing corporations Fannie Mae and Freddie Mac from Sen. David Vitter (R-La.), and giving a new consumer protection agency primary authority over non-bank companies, like payday lenders, from Sen. Charles Schumer (D-NY). One amendment offered by Dodd directing the Government Accountability Office to review "Repo 105" accounting gimmicks—the kind used by Lehman Brothers to cook its books—is a clear reaction to the recent report on Lehman's demise by its bankruptcy examiner.

As the Senate banking committee heads into mark-up this week, all of these amendments will come into play. While some of them would bolster the bill, many amount to death by a thousand cuts for Dodd's Wall Street crackdown. Check back here throughout the week for the latest on the maneuvering and potential gutting of the Senate's financial reform efforts.

 

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