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Democrats Re-Open FinReg Conference Committee

Democrats will return to the conference committee on the Dodd-Frank Wall Street reform bill as soon as today, specifically to deal with the $19 billion dollar bank tax that has moderate Republicans needed for Senate passage flipping their votes.

The unusual development points to deepening troubles for Democrats in their push to finish the bill before the July 4 recess. The death Monday of Sen. Robert Byrd (D-W.V.) and the decision by Sen. Scott Brown (R-Mass.) to oppose the bill unless the tax was removed left Democrats several votes shy of Senate passage.

Other key Senate Republican holdouts — Susan Collins of Maine, Olympia Snowe of Maine and Chuck Grassley of Iowa — also expressed concern with the tax, saying they were surprised to learn that it was added early Friday morning during an all-night committee meeting.

House offices were notified Tuesday morning of a possible committee meeting at 2 p.m. in the Rayburn office building.

The bill will still satisfy paygo requirements. Among the options being discussed to replace the bank levy are tapping unused TARP money and raising FDIC premiums.

Basically the House would have voted themselves into a corner if they voted on the conference report and saw that the Senate couldn’t pass it. Since conference reports cannot be filibustered, they’d essentially have to start over.

However, the conference committee has basically been gaveled closed, and the report submitted. It’s unclear how they can re-open it, though Congressional leaders obviously believe they can.

A strong conference report would make Scott Brown pay for this heartache by canceling out entirely the Volcker rule loopholes he got into the bill, securing Maria Cantwell’s support as a replacement for Brown’s. As far as I can tell, nobody else cares about those specific loopholes for the benefit of Massachusetts banks and asset management firms but him. So once West Virginia replaces its Senator, a pure Cantwell-for-Brown swap could make going back to conference a positive experience.

But I wouldn’t hold my breath.

UPDATE: One reason not to hold your breath is that there are probably Democrats – Brown’s colleague in Massachusetts John Kerry and Chuck Schumer come to mind – who are perfectly happy with that hedge fund loophole, and even more happy with Brown taking the lead on it. A strong Majority Leader wouldn’t have a problem calling Schumer and Kerry’s bluff, either, but then again…

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David Dayen

David Dayen