With Dodd's Retirement, Renewed Speculation on Reed

Several months ago, talk of Senator Christopher Dodd leaving the powerful banking committee sparked fevered speculation that Senator Jack Reed might leapfrog the more senior Senator Tim Johnson, slowed by a stroke, and take control of the panel. That all died down when Dodd decided to stay put. But now that Dodd has announced his retirement, the chatter has begun again.

The Wall Street Journal asked Jaret Seiberg, a policy analyst at Concept Capital, a Washington research group, to handicap it:

The leading candidate is Sen. Tim Johnson, of South Dakota. While Johnson would normally be a shoe-in because of seniority, he hasn’t fully recovered from a stroke-like illness several years ago, which could complicate his chances. Johnson, whose state houses the operations of several credit-card issuers, is likely to head off a potentially overzealous consumer protection agency or what the industry considers onerous restrictions, such as interest-rate caps.

Next line in terms of seniority is Rhode Island Sen. Jack Reed. A West Point graduate and former paratrooper, Reed is viewed by many in the financial industry as the Senate version of Barney Frank, the House Financial Service Committee chairman, Seiberg notes. Like Frank, Reed is a left-leaning Democrat, but he understands the complexity of the financial system and is unlikely to craft populist legislation that could have unintended consequences. That said, Reed has backed proposals that banks abhor, such as mortgage cram-downs (which allow a bankruptcy judge to rewrite mortgage terms)

A long shot would be New York Senator Chuck Schumer. Known for his anti-big-business statements, Schumer has actually championed legislation that helped lenders during the credit boom. “Schumer’s rhetoric may scare some, but his legislative work should be a plus for the industry,” Seiberg says. In the end, a Schumer-led panel would likely shy away from laws/regulations (such as breaking up the big banks) that could hurt the financial sector in his own backyard of New York.

What does his gut tell Seiberg? That mostly likely there will be some type of “gentlemen’s” power-sharing deal between Johnson and Reed, in which Johnson would serve as chairman and Reed would get more staff and help run the show as a subcommittee chairman.

The post is particularly important, these days, amid a push for sweeping financial reform in the wake of the economic meltdown.

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