Why Are Brown, Collins, and Snowe Threatening to Jump Ship on Financial Reform?

Inside the beltway, panic started to set in this morning as the prospects for passing financial regulatory reform legislation before July 4th hit a patch of turbulence with Senators Olympia Snowe (R-ME), Susan Collins (R-ME), and Scott Brown (R-MA) all threatening to vote against the conference report merging the House and Senate bills.

The offending language for all three Republicans is a $19 billion tax on large banks and hedge funds added at the last minute to keep the legislation from adding to the deficit. Brown wants that gap to be paid for through spending cuts instead, believing the tax would be harmful to the financial institutions.

After an afternoon of trying to convince the three to change their minds, Senator Chris Dodd (D-CT) and Congressman Barney Frank (D-MA) announced the conference committee would reconvene this evening to make the changes necessary to win enough votes in the Senate.

Obviously, this is a headache (reopening conference almost guarantees the bill won't be sent to the president before the July 4th break), but it could have been a lot worse. Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) were smart to keep the report from the floor of the House and Senate until both chambers were sure they had the votes. If the House had already accepted the report, the conference couldn't be reopened.

Back-tracking at this stage to make some sort of deal which will likely include cuts to other government programs is certainly less than desirable, but it could be much worse. Without Pelosi and Reid's smart management, this would be a much larger setback.

As it is, financial reform is still almost certain to pass with relatively minor changes, it'll just be a week later than expected.

Frankly, the 24-hour widespread hysteria of pundits sounding the death knell of a major Obama policy objective seem a bit silly now. Actually, they seemed silly at the time too.

Adaptability: one. Conventional wisdom: zero.


UPDATE: The House-Senate conference has added an $8 billion increase in FDIC premiums paid by commercial banks and $11 billion of rerouted TARP funds to the report to replace the $19 billion tax on large commercial banks and hedge funds opposed by Senators Brown, Collins, and Snowe.