After a brutal 21-hour legislative session ending in the early morning hours of June 25, Senate Banking Committee Chairman Chris Dodd thought regulatory reform was finally finished.
The bill's trickiest sticking points had been resolved at the 11th hour, and the Connecticut Democrat said he felt confident he had enough support to win the necessary 60 votes to push the agreement through the Senate.
It took only a few hours before he realized he was wrong. A key Republican supporter threatened to vote against the bill after a last-minute addition to it. Within three days the situation had become a full-blown crisis, with the death of Sen. Robert Byrd and opposition from a fellow Democrat robbing Dodd of other badly needed votes.
It was arguably Dodd's lowest moment during the battle over regulatory reform. After an 18-month bout of negotiations, everything threatened to come apart. To get it back on track, Dodd had to reopen the conference committee after it had already signed off on a final bill — an unprecedented move in the U.S. Senate.
"We signed the conference report. I had heart failure thinking, what does that mean?" Dodd said in a sit-down interview with American Banker. "In the final hours, I had to go back into a conference again … and go to the parliamentarian to find out how to do it."
In the nearly hour long interview in an office in the Russell Senate building before the chamber went on its August recess, Dodd was candid about his peaks and valleys during the debate, including his disappointments with the final bill.
He also weighed picks for key agencies, rebutted criticism that the law lacks detail and described the Treasury Department's relentless defense of the Federal Reserve Board, which helped scuttle Dodd's plan to create a single banking regulator.
Ultimately, of course, Dodd was able to get a final bill passed. But in the days immediately after the conclusion of the conference, the situation looked bleak.
At first, the parliamentarian told Dodd he could not reopen the conference, a decision Dodd could not accept.
"The parliamentarian first told me, 'Oh no, it says you can't go back in,' " Dodd said. "I said, 'Well, tell me what rule I'd be objecting to if I wanted to go back in?' And he said, 'Oh, well, it's tradition.' And I said, 'Well, that's not a rule.' We went through this daylong thing over here trying to convince the parliamentarian. I finally said I'm just going to do it, because there wasn't any rule."
Many observers were shocked when the conference reopened, while others criticized Dodd for not ensuring adequate support ahead of time. The matter had come up after the House added a provision to the bill that would have taxed large financial firms to pay for the costs of the legislation. Sen. Scott Brown, R-Mass., and other key Republicans objected to the measure, saying they could no longer support the final bill.
Dodd acknowledged it crossed his mind the tax "might" be an issue, but said he thought Republican concerns had already been addressed by a last-minute change a GOP staff member successfully added to the bill.
According to Dodd, Mark Oesterle, a staffer for Sen. Richard Shelby, the lead Republican on the Banking Committee, said receipts from the tax should be given to the Treasury, not the FDIC, to ensure it did not look like a bailout fund. Dodd delayed a final vote on the bill during conference in order to change the provision.
"I thought, well that's pretty good," Dodd said. "I thought it was a pretty clever way to make clear it wasn't something that was going to be used for bailout funds, just used for deficit reduction. It seemed like it answered a lot of questions."
Because it was added at the last minute, however, Dodd never checked with Brown or the two other Republicans whose support he was counting on — Maine Sens. Olympia Snowe and Susan Collins — to see if the issue was a deal-breaker for them, too. In the end, it didn't matter if Collins and Snowe would support it. Without Brown's vote, Dodd understood the bill would fail.
"I knew without Scott Brown, we didn't have the votes anyway," Dodd said. "It was one and you're done, so I couldn't lose one."
After the conference reopened, Dodd scrapped the tax and added another provision that would require the FDIC to build federal reserves. The provision meant the final bill was budget-neutral and satisfied Brown and others.
"It was 30 years of tricks and skills you bring to bear in a moment like that to try and get through with no guarantees it will work," he said. "It's not a question of sitting in the mirror and deciding what to do from day to day and doing it. In order to get this done you have to accommodate where you can."
MAN OF THE MOMENT
Dodd readily admitted the Banking Committee was never his first choice to chair.
Though he assumed the chairmanship after Democrats unexpectedly took control of the Senate in 2007, he played a prominent role on the Foreign Relations and Health, Education, Labor and Pensions committees, where he was No. 2 to Sen. Joe Biden on Foreign Relations and Edward Kennedy on HELP.
Last year, both chairs were open to him, and most observers expected Dodd to jump ship.
"For 28 years, I never got to chair a major committee, and all of a sudden within a space of months, my three dearest friends in the Senate — the people I'm closest to — one retires, one becomes vice president and the other dies," Dodd said. "The committee of choice for me is HELP."
A year ago, Dodd was already serving as acting chairman of HELP because of Kennedy's illness with brain cancer, playing a critical role in the debate over health care reform. His passion for education and foreign relations issues was also much deeper than for financial issues.
At the same time, Dodd was facing personal troubles. Kennedy was his closest friend, and his illness followed shortly after the death of his sister and his own health issues.
"I have a sister who dies on July 6th, I'm diagnosed with cancer, and of course Teddy died a year ago this month in August," he said. "So I go through and get operated on. … Ten days later I go out and give the eulogy for him, and was simultaneously putting all this together, so working on the health care bill and then [financial reform], and then I had to make this choice which was hard."
But Dodd said he felt compelled to finish regulatory reform.
"I've done all my major work on children's issues — the things I really love working on," he said. "The Foreign Relations Committee I like working on … but I really felt that I had an obligation to finish this, the financial services stuff."
His decision was swayed somewhat by Shelby, who he thought could support a reform bill.
"Quite candidly, I was pretty well convinced at that point that Sen. Shelby wanted to put together a bipartisan bill, and that was encouraging to me," he said. "I thought, let's take the chance to do that and work it out."
Dodd had already made the tough decision in January not to seek re-election.
As Connecticut's longest-serving senator, he has always been well liked, but his popularity slumped after an ill-fated bid to seek the Democratic nomination for president in 2008. When he moved his family to Iowa to campaign, the episode soured some of his longtime supporters and if Dodd had run for re-election, he would have had to spend significant time and energy this year to make a comeback, political analysts said.
Dodd said it would have been practically impossible for him to run for re-election and pass regulatory reform.
"I couldn't have done it had I been a candidate all year," he said. "Every move I would have made would have been, 'Ah, he's only doing that to get a contribution,' or, 'He's only doing that because he's worried about a base' or something else.' Everything would have been second-guessed. And I think it would have just been very difficult."
A HARD ROAD
Although Dodd never said he regretted his decision to see financial reform through, he jokes that if had he known what he was in for, he might not have done it.
"There were times, believe you me," he said, laughing.
For one thing, partnering with Shelby proved much more difficult than he expected. Both lawmakers had said they were in favor of reform, and Dodd said he thought they would eventually "come together."
"That's why I stayed with it — part of the reason," he said.
Dodd said he began courting Shelby early in 2009, insisting he be included in meetings at the White House. Dodd knew that bipartisan bills were much easier to pass in the Senate, and he has a long history of working across the aisle.
"I really wanted to try and get a bipartisan bill," he said.
"Certainly in a bill of this magnitude and size, I anticipated in order to have any success, it would require that."
Early on, all the players involved thought it would happen.
"This shows you how naive we were — the White House in January 2009 said, 'Can you have a bill done by April 1? The president is going to Europe and he would like to go to that meeting with a financial reform package done,' " Dodd said. "It sounds humorous now. What were they thinking?"
Even through last fall, Dodd said he was convinced that Shelby wanted a bill. The Alabama lawmaker hired four additional staffers expressly for the purpose of hashing out details of the legislation. But as the year bled on without a deal, Dodd said he grew discouraged.
Talks eventually broke down over how to structure a consumer protection regulator. "There was a lot of hostility on the Republican side from the very beginning to consumer protection," Dodd said. "This was a major issue for them. In fact, they didn't want to talk about any other aspect of the bill until I conceded on that point, which I was not going to do."
Dodd was even willing to place the new regulator inside a single prudential regulator for all banks — an approach Shelby supported, according to sources — but ultimately backed away from that idea.
Dodd also said Shelby and other opponents were concerned that the massive bill would lead to unintended consequences, and did not want to share responsibility for them. "It's a safer place to be, to some degree, against big bills, because there are invariably things that are wrong with them," Dodd said. "I promise you, there will be things that pop up and there will be a big story someday that says, 'Why didn't you ever think of that or this that or the other?'"
After unveiling an ambitious bill in November of last year — among other things, the legislation would have merged the banking regulators into one — Dodd said he hosted a meeting with multiple committee members to try to strike a deal.
"I was shopping, I was trying to find a partner, and at this point it wasn't looking like my good friend from Alabama was necessarily going to want to partner up on this bill," he said. Shelby's staff were asking "Socratic" questions that still showed the two sides were far apart, he said.
Ultimately, Dodd found a partner of sorts in Sen. Bob Corker. The discussion was fruitful, but Dodd found that the Tennessee Republican could not bring along other GOP members, and he abandoned the talks.
Still, the negotiations had an impact on the bill, including on how the new consumer agency is structured. In an effort to help attract GOP support, Dodd placed the independent agency under the Fed.
"I really get a kick out of it, because a lot of what's in this bill were Republican ideas, that I was sort of taking at the time thinking that was going to get me my bipartisanship," Dodd said. "So the idea of putting the consumer protection bureau in the Fed was a Republican idea."
TREASURY DEFENDS FED
It wasn't just the Republicans causing Dodd problems. His vision of a single bank regulator would have stripped the Fed and FDIC of their banking supervisory powers and be left to focus solely on monetary policy and deposit insurance, respectively.
"I still think the supervisory function of the Fed is overblown," Dodd said. "I couldn't find anyone who ever sat in an open market committee that could recall that anyone said, 'By the way, as we are thinking about monetary policy, here's some information from our supervisory wing.' "
While Shelby supported such an approach, Dodd faced blowback from the Treasury, which took the lead in squashing the plan.
"The Treasury was always pushing for the Fed," Dodd said. "They are all Fed people over there, and of course they had a lot of detailees from the Fed … so you had really a Fed bias, which we were pushing against."
The failure to consolidate the banking regulatory system clearly still gnaws at Dodd, who said Congress eventually will have to modernize the Fed and other agencies.
"I would have preferred more of a concentrated prudential regulator in all of this … but I accepted the political reality," he said. "I did the best I could in all of that."
Industry critics argue the final bill made too many political compromises, including adding provisions that restrict interchange fees on debit cards and require banks to push out certain derivatives activities.
Dodd countered that it was always a balancing act, and that he never compromised on principle.
"You want to write a good bill. You can get votes, but in order to get the votes your bill becomes a shadow of itself or you try and write a stronger bill but you don't get the votes. So what's the point, you don't have a bill," he said. "You try to write the bill in a way that would be a strong bill — that those who are watching this would say this is a remarkable bill in terms of what it does and you've got the 60 votes to pass it."
Dodd said he was pulled and pushed from both sides.
"You are working against, what was it, a thousand lobbyists that got hired to work against this bill?" he said. "I don't have a Republican partner, I have a one-vote margin in conference. It's a complicated subject matter. I've got a left that doesn't think you're being strong enough and a right that thinks you've gone too far."
Dodd said he had enough problems getting Democrats to support the bill. "It was a testy moment with Byron Dorgan, and you know the testy time I had with people I like, Ted Kaufman and even [Sens. Jeff] Merkley and [Carl] Levin. There was a push from the left as well and threats all the time that were going on."
GUARDING THE LEGACY
Several critics have argued the bill does not go far enough, in part because it leaves many key provisions in the hands of regulators, including how to define systemic risk and write higher capital standards.
But Dodd said regulators are more capable of writing such rules than Congress.
"There is not the competency of 535 members of Congress to be sophisticated and knowledgeable enough to be writing what are the regulatory requirements, which deserve public commentary," he said. "My goal was to build a structure here."
He said the hardest part about successful implementation of the law is finding strong candidates to run the agencies and attracting and retaining top talent for underpaid government jobs.
"In the case of the consumer protection division you need to have someone who can manage and set up a good agency, and that requires a skill set to do it right," he said. "They are never going to be compensated even remotely close to what they could possibly make in the private sector."
Dodd acknowledged he wanted FDIC Chairman Sheila Bair to consider heading the consumer bureau, but he confirmed that she is not interested.
He also recognized that consumer groups were lobbying to have Harvard professor Elizabeth Warren head the agency, but he said she would have difficulty being confirmed.
"If the administration goes through an eight-month debate over who is going to run this, you are going to do damage before you start," Dodd said. "You need to have a good-quality individual, and if [Warren] can be confirmed, then step up and do it. I just think it's a problem, but I could be wrong."
One of Dodd's senior staffers, Amy Friend, has been rumored as a candidate to lead the Office of the Comptroller of the Currency.
"There was talk about Amy, you know, but Amy has doubts," he said. "I've said you think about it. I'm happy to go to bat if she wants it, but she hasn't said she wants it yet. And I don't even know if she'd get it if I went to bat for her. But I think she's great and competent and did a hell of a job on this bill, by the way."
DODD AND FRANK
While the conference unfolded for most observers on C-Span, Dodd said that he and House Financial Services Committee Barney Frank were in constant contact and essentially knew how the sessions would play out.
There were some surprises, however. Dodd said he never expected an amendment from Sen. Dick Durbin, D-Ill., to regulate debit interchange rates, to succeed.
"The interchange fees … got a lot of votes I never thought we would get. I never thought it would pass," Dodd said.
He was similarly taken aback when the House accepted an amendment from Sen. Tom Harkin, D-Iowa, to exempt equity-indexed annuities from oversight by the Securities and Exchange Commission by regulating them like an insurance product.
"The fact that the House accepted it almost blew me away," he said. "That was a surprise; I think Harkin thought the thing was dead."
The contrast between Dodd and Frank was easiest to spot during the conference committee process. While the Massachusetts Democrat likes to stick to a schedule, his curtness can be abrasive at times. Dodd, however, seemed the more gracious of the two, often allowing colleagues to exceed time limitations. Rather than lashing back when others criticize his policies, Dodd generally lets them vent and moves on.
Overall, Dodd said he is pleased with the final bill.
"We've done the job we could do as well as we could possibly do it under a very difficult set of circumstances," he said.
Although Dodd is in the twilight of his Senate career, he mostly avoided talk of the future. When asked about it, he recited from memory one of his favorite poems, Yeats' "When You Are Old."
"I thought that was an appropriate poem: 'When you are old and grey [and] … full of sleep and [nodding] by the fire, take down this book and read and … just remember that one old person loved [the] pilgrim soul in you and the sorrows of your changing face.' "
He conceded that he is not quite ready to go. "I am sad because I love the work, but it's the right time to go for me," he said. "I was 36 in the Senate when I arrived and I'm sure it's true of your mother and my mother, how many times did they tell us, 'Don't be the last person at the cocktail party'? When you are having a great time, isn't that about the time to leave?"
Dodd said he is leaving on a high note, helping to pass health care reform and financial reform.
"In a sense, this is a nice way to go out," he said. "It feels good. It feels like you are leaving having made a contribution, not just sort of spinning your wheels waiting for the clock to run out."
For his grand finale, Dodd said he has about six or seven hearings coming up in September, including oversight on reform implementation. "I'm going to be busy," he said. "It's not just packing bags."
But when pressed on what's next after his retirement, Dodd offered only a smile and a single word: "Freedom."