Paul Volcker is scheduled to appear before the Senate Banking Committee on Tuesday afternoon to explain his proposal to limit risk-taking by commercial banks -- the so-called Volcker Rule that would ban banks from engaging in proprietary trading with federally insured depositor money.
But if the Financial Times is to be trusted, the Volcker Rule is already dead on arrival, because Richard Shelby, the ranking Republican senator on the Banking Committee, doesn't like it, the Democrats no longer have 60 votes, and Chris Dodd, the chairman of the committee, wants to play nice.
Don't read any further if you have blood pressure issues.
From the FT:
A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform.
"Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan," the staffer said. "He is not going to risk bipartisan support to make the White House happy."
I guess that answers the question about whether the lame duck Dodd has any intention of standing up and becoming a real leader, now that he doesn't have to worry about getting reelected. Do I even need to mention that the Republicans are also opposed to a Consumer Financial Protection Agency, increased taxes on the biggest banks, and tough derivatives regulation? Bipartisan support for financial regulatory reform by definition means that whatever passes the Senate will be the opposite of "important." It will be irrelevant.
As my colleague Alex Koppelman observes, "Senate Democrats have single-handedly disproven the idea that negative reinforcement can teach people not to do stupid things." Dodd's pusillanimous cave-in won't enhance his legacy. It will annihilate it.
UPDATE: Kirstin Brost, Communications Director, Senate Banking Committee, responds:
I don't know who [FT's] DealReporter spoke to, but they do not speak for Chris Dodd.
Dodd strongly supports the Volcker rule. He joined Obama for the announcement and is holding two important hearings on the proposal this week -- one tomorrow with Volcker and a Treasury rep and a second on Thursday with business and academic experts.
Brost did not waste any time responding, but the proof will be in the legislation.