Dodd Bank Bill: Brown Folds but Vitter’s Not-Everything’s-a-Bank Amendment Passes

Yesterday, Scott Brown caved, and the Senate passed its “financial reform.” That story is at the top of every news web site.

But what the establishment media didn’t tell you – unless you waded through the details in a select few news articles or saw this fairly balanced short article in the Washington Post – is that Wednesday evening,  hours after the first cloture vote failed and hours after  I informed readers about an effort by Sen. David Vitter (R-La.), to narrow the scope of what I have been calling the Obama-Dodd-Frank-Everything’s A Bank Bill, Democrats blinked and Vitter’s amendment passed without objection by voice vote.

Vitter’s amendment to the so-called “Restoring American Financial Stability Act” gives a precise meaning to the term “financial company” – changing the definition from Dodd’s original language of “substantially engaged in activities in the United States that are financial in nature” to that of the much stricter “predominantly engaged.” And his amendment precisely defines “predominantly engaged” as a business that makes no less than 85 percent of its revenue from financial activities.

As a result of Vitter’s measure that passed during the brief 24-hour period of most of the GOP standing together in opposition (along with Democrats Maria Cantwell and Russ Feingold for their own reasons), a very important change was made.

There are still many horrors in this bill, but at least now a business will only fall under the new regime of the Federal Reserve for taxation, regulation, and nationalization if it is “predominantly engaged” in financial activities. Most retailers and manufacturers — although still hit by other parts of the bill such as the broad reach of the Bureau of Consumer Financial Protection – will not come under Fed supervision for “financial stability.”

Ironically, I concluded my article in, “There are many reasons for the GOP and truly moderate Democrats in the Senate not to grant cloture. Even if the bill was primarily concerned with Wall Street, it still does nothing about Fannie and Freddie, But making sure the Wall Street bill is actually about Wall Street – or at the very least about banks – should be a line in the sand. There should this firm message. ‘No Vitter amendment. No cloture.  No dice!’” The amazing thing is, though not necessarily as part of a conscious effort of all who voted “no,” this is pretty close to what happened.

The lesson from the fight for Vitter’s amendment – which was assisted by support from the measure by the U.S. Chamber of Commerce, the National Association of Manufacturers and many businesses large and small, as well as a Center-Right coalition letter signed by CEI and other groups that specifically called out the bill’s broad definition of financial company– is clear. From health care to financial regulation, the progressives will paint the enemy as unpopular big business – from big insurers to big oil to big Wall Street firms.

But once the Center-Right forces them to debate, as the Vitter amendment did, how a particular bill would affect entrepreneurial Main Street businesses, they will duck and cover and sometimes retreat.. Despite opposition from the Huffington Post crowd and other progressives, the Obama administration and Senate Democrats made a significant concession likely because they did not want to be seen as going after the entrepreneurial firms that are rightly seen as the backbone of this country.

Main Street businesses do not have to be necessarily small, either. Just examples of the American dream that the public can relate too. Vitter made the excellent point that under the bill as written, Google could have been considered a bank. Google may be big, but it grew that way because it pleased its customers, and no one can rationally accuse Google of contributing to the financial crisis.

And despite what many in the establishment media say, this fight is not over, as even President Obama seemed to acknowledge in his speech yesterday when he talked about “lobbyists” trying to thwart a House-Senate conference. Reconciling the House and Senate bills is not going to be a cakewalk. There are many differing provisions.

The Senate bill lacks, for instance, the provisions in the House bill to comprehensively audit the activities of the Federal Reserve. The House bill, at the behest of “Blue Dog” Democrats, also limits on the jurisdiction Consumer Financial Protection Agency, so that it cannot have jurisdiction over orthodontists who spread out payments for braces or small stores with layaway plans.

Time magazine liberal columnist Michael Grunwald wrote this about the uncertain prospects for a final bill about a week ago: “Even if the Senate bill did attract 60 votes, it would have to be reconciled with the House bill, and then the House and Senate both would have to pass the reconciled bill — and all probably before the pre-election August recess, while dealing with a Supreme Court confirmation battle and jobs bills and whatever else comes down the pike. I’m not a Beltway insider anymore, but that sounds hard! “

And even White House spokesman Robert Gibbs has said it will likely be the Fourth of July before the House and Senate forge an agreement and the President Obama has a final bill on his desk.

There is a window to make known the impact of the many terrible things that remains in this bill – from a massive new consumer agency with the power to track virtually every financial transaction to share with other big agencies like the IRS, proxy access provisions that would federalize state incorporation laws and empower unions and other progressive shareholders to wage director campaigns at the company and other shareholders’ expense, and no attempted reform of the government-sponsored enterprises Fannie Mae and Freddie Mac at the center of the financial mess.

To slightly alter a popular saying, it’s never over until the same bill passes both the House and Senate and is sent to the President’s desk. The Center-Right coalition should learn an important lesson from Vitter’s smart and principled fight and should not waste this window.