Financial Reform Bill May Skirt Debate

June 21, 2010 by · Leave a Comment
Filed under: Bond Regulation, General, The Ratings System 

Senator Christopher Dodd (D-CT) is maneuvering the financial reform bill to go straight to a vote in late April without any floor debate. As the most ambitious financial reform proposal since the Great Depression, the move to ignore more than 400 proposed amendments has provoked criticism.

Republicans, who are traditional supporters of the free markets that would be adversely affected by many provisions in the bill, are in a difficult position. To fight the bill “on behalf of the banks” could result in voter backlash. There is widespread public support for strengthening banking regulations. To allow it to go forward without challenge would be to abandon their traditional supporters.

The bill is also open to opposition from some Democrats who don’t feel that new regulations are tough enough.

As for how the bill affects credit rating agencies, Senator Bob Corker (R-TN), a member of the Senate Banking Committee who has been working closely with Senator Dodd to craft the bill, commented that the proposed new regulations had not changed from Dodd’s original plan. He said that the bill placed a “pretty big liability burden” on the rating agencies. Generally, Republicans are opposed to this increased risk of litigation. They argue that it will result in frivolous and expensive lawsuits that would serve no good purpose. But the challenge remains:  How can they frame this debate without angering the voter base?

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