Ezra Klein has an excellent post challenging the conventional take that invoking cloture on Wall Street reform is an unalterably good thing. In particular, he takes a look at Scott Brown, who was the only member of the Senate to switch his vote on cloture from no to yes today:

Brown’s objection was that he wanted mutual funds, insurers, trusts and a couple other types of financial institutions that have powerful presences in Massachusetts exempted from many of the bill’s provisions, particularly the Volcker rule. His vote today implied that assurances have been made. But the end policy here is not a particularly good one: It creates another place in the system where risks can migrate, and though the systemic regulator could step in if it sees things getting out of control, there’s no assurance that it will step in. Meanwhile, Maria Cantwell was pushing for enforceable language on derivatives, and her concerns still haven’t been met. So getting to the finish line here took the form of freeing financial institutions from regulations rather than making the bill stronger.

A step back for a second. There IS a Volcker rule in the bill; but it leaves a lot to the discretion of the regulators. The Merkley-Levin amendment, which will get a vote later today as one of two post-cloture votes on amendments, codifies the Volcker rule and strengthens it. But what Brown wants is to weaken the Volcker rule as it relates to financial services businesses in Massachusetts. And it looks like he got his wish:

Sen. Scott Brown (R-Mass.) said Thursday that he flipped his vote on the financial regulatory overhaul because of assurances he received from Senate Majority Leader Harry Reid (D-Nev.) […]

“I supported moving the financial bill forward today because I received assurances from Senator Reid and his leadership team that the issues related to Massachusetts in the financial reform bill will be fixed before it is signed into law,” he said in a statement. “We are still working to ensure these commitments are fulfilled prior to a final vote.”

Amazing. Well, the best way to deal with Brown on this issue is to pass the Merkley-Levin amendment that codifies the language and vacates any Reid-Brown deal, and at this point, with cloture invoked, there would be nothing Brown could do about it. Richard Shelby apparently supports Merkley-Levin, and namesake Paul Volcker has pushed hard on it. There’s a downside to that too, of course; Merkley-Levin only passes if the Brownback amendment exempting auto dealers from the CFPA passes. And with that exemption already in the House bill, it would be locked into any conference report.

Ezra makes another good point: why did the rest of the Senate Democratic caucus abandon Cantwell and Feingold? We now have a derivatives piece with a gaping loophole in it, no breakup of the banks or restrictions on which kind of institution can engage in what kind of trading, and assurances made to Scott Brown to exempt his favorite financial institutions. Why would they sanction that? As Ezra says, “Party discipline isn’t dead, I guess.”

David Dayen

David Dayen