The filibuster move is great news for Obama's financial reform agenda
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WASHINGTON — The decision by Harry Reid and Senate Democrats to eliminate the filibuster for non-Supreme Court appointments on Thursday will have long-lasting, far-reaching consequences. But here is one of the most immediate: It will be much easier for President Barack Obama to pursue an economic and financial regulation agenda in the remainder of his term than it would have been otherwise.
This won't mean any major changes to fiscal policy or new legislation: Reid excluded legislation from the filibuster elimination, and in terms of passing laws, the big hangup is House Republican majority, not the Senate Republican minority.
But much of the work of carrying out the president's agenda for reforming the financial system is carried out by unelected appointees anyway. And the elimination of the filibuster on those appointees will make carrying out that agenda a lot easier. Let's count the ways.
The Federal Reserve. Janet Yellen was in good shape to be confirmed as Fed chair even before the filibuster rule change, and now that she needs only a simple majority, her confirmation is even more certain. But things were going to be trickier for the president to fill out the rest of the powerful seven-member Federal Reserve Board. Yellen's old job as vice chair that will now be vacant. Two additional slots are set to be open (previously occupied by the recently-retired Elizabeth Duke and Sarah Bloom Raskin, Obama's nominee to be deputy treasury secretary, whose confirmation for that role is now more certain).
Obama could appoint either current governor Daniel Tarullo or a new addition to the board to be vice chairman for supervision, an as-yet unfilled position (Tarullo has been the de facto chief of bank supervision at the Fed). Governor Jerome Powell's term is up in January, and reports have signaled he will be renominated; he is a Republican who was first nominated as part of a package deal with cooperation from Republicans for confirming other nominees.
Taken together, these appointments will do much to shape how the nation's leading banks and other financial institutions are regulated. And where in the past Obama has needed to confine his choices to nominees who might win at least a handful of Republican votes for confirmation, he can now operate with a freer hand, choosing nominees who most closely hew to his own ideological inclinations.
Housing finance. The president nominated Rep. Mel Watt, D-N.C., to run the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac; Republicans have blocked it, as he secured only 56 votes needed for his confirmation to go forward, not the 60 needed in the pre-filibuster era. Watt's confirmation now appears set to proceed.
It's a tremendously important job for guiding the future of the government's role in supporting the housing market. Watt could emerge as an influential voice in the debate percolating in Congress over a longer-term strategy for dealing with Fannie Mae and Freddie Mac, the companies put under government control more than five years ago that have accounted for a massive portion of U.S. mortgage lending since then.
And in the near-term, the decisions by Fannie Mae and Freddie Mac, significantly influenced by Watt as their regulator, will determine who can get a home loan and on what terms. Said Krishna Guha, an analyst at the ISI Group, Watt's confirmation "will pave the way for a renewed push to help underwater and lower credit mortgage borrowers access refinancing at today's low mortgage rates."
Commodities regulation. The president has nominated Treasury official Timothy Massad to chair the Commodities Futures Trading Commission, and another commissioner, Barton Chilton, has said he is stepping down. The change to the filibuster rules gives Obama more flexibility to fill win confirmation for his appointees for both slots.
Consumer protection. The financial industry is challenging rulings of the Consumer Financial Protection Bureau in court, and the court that will hear those challenges is the D.C. Court of Appeals. The proximate cause of the Reid taking the "nuclear option" to reduce the usage of the filibuster was Republicans' refusal to approve Obama nominees for exactly those positions.
If one assumes that Obama nominees will be relatively open to upholding aggressive regulation, the shift in the composition of the appeals court will give the CFPB stronger legs to stand on as the legal challenges to its regulations mount.
With the nuclear option invoked, and fallout sure to come, nobody knows just what form the all-out legislative war between Republicans and Democrats in the Senate will take. But in the meantime, the result there is a concrete improvement in Obama's ability to reshape the financial system. The question is how his appointees use it.
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Irwin writes the Econ Agenda column for The Washington Post and is the economics editor of Wonkblog, The Post's site for policy news and analysis.