By Kevin Drawbaugh - Analysis
WASHINGTON (Reuters) - How Senator Christopher Dodd handles his final months in office is suddenly the big question surrounding U.S. efforts to tighten bank and capital market regulation as part of a worldwide push for reforms.
The Democratic chairman of the Senate Banking Committee, in trouble politically for months back home in Connecticut, was expected to announce on Wednesday that he will not seek reelection, according to two senior Democratic party aides.
Whether he finishes out his term as an aggressive reformer or not, and whether the Democratic party can muster enough support to push through the Obama administration’s financial regulation agenda, will be the key issues in months ahead.
“Dodd’s announcement is a neutral for banks as we do not expect it to impact financial reform legislation,” said policy analyst Jaret Seiberg at investment firm Concept Capital.
“Dodd was already going to have to compromise ... if he wanted to enact the bill. His decision to retire after the election does not alter this equation,” Seiberg said.
Sources said Dodd will likely see through to completion his commitment to financial reform and remain chairman of the committee until the end of 2010.
He introduced an 1,139-page reform bill in November that was in some ways more ambitious than the 1,279-page bill pushed through the House of Representatives last month by Representative Barney Frank.
The Dodd measure was slammed immediately by Senator Richard Shelby, the top Republican on the banking committee. Dodd responded by setting up four bipartisan teams of two committee members each to work on controversial issues.
Some committee member have said they are making progress toward agreement, with key provisions of Dodd’s original bill undergoing significant change.
As Round Two of Congress’ punishing fight over financial regulation gets under way this month, Dodd will have his legacy in mind as he ends a long career on Capitol Hill, as well as the fragility of the Democrats’ Senate majority.
Democratic Senator Byron Dorgan said on Tuesday he will not seek reelection.
Dug in deeply in opposition to reforms are Republicans and the “fat cat bankers on Wall Street,” as President Barack Obama has labeled them. They suffered a defeat on December 11, when the House approved a bill loaded with reforms the bankers opposed.
Now they are throwing everything they’ve got into blocking reforms in the Senate, knowing it is an arena where millionaire lawmakers often look after their own.
The Senate will not fully reconvene until January 20.
It has been clear for months that Dodd was far behind in the polls in his home state as he has been hounded by questions about his ties to the unpopular financial industry.
In 2003, he took out two low-rate mortgages from Countrywide Financial Corp, once the largest U.S. home lender that was acquired by Bank of America in 2008. Countrywide was widely criticized for its subprime mortgage business.
Critics said the loans represented a conflict of interest since Dodd’s committee oversees mortgage lenders. A Senate ethics investigation followed. Dodd later refinanced the two loans, said he regretted doing business with Countrywide and made public related documents. The investigation ended.
Dodd also has long-standing ties to Wall Street, having raised millions of dollars over the years from employees of firms such as Goldman Sachs and Citigroup, many of whom go home to Connecticut from New York City every night.
Dodd was further injured politically by his role in a controversy over bonuses for executives at bailed-out former mega-insurer American International Group.
He made a brief run for the 2008 Democratic presidential nomination, but withdrew after winning few votes.
Reporting by Kevin Drawbaugh; Editing by Andrea Ricci