Reform, or “Reform”?

Mixed results as press tries to gauge meaning of Dodd's retirement

This story has been updated. See note at conclusion.

The upcoming retirement of Sen. Chris Dodd (D-Conn.), and what it means for financial regulatory reform, presented an interesting challenge this week for political journalists—and helped bring forward some underlying assumptions about what a “good outcome” is. Whether or not they’re right, the political cognoscenti seem more or less to agree that Dodd—the chairman of the Senate Banking Committee—will want to cement his legacy by shepherding a reform measure into law. But doing so will probably mean retreating from the aggressive bill Dodd proposed in November, which would consolidate banking regulators and create new agencies to monitor financial risk and protect consumers.

The real question for news outlets was how to frame the story. Is Dodd’s retirement a good thing, because his quasi-lame duck status frees him from parochial political concerns and makes it more likely that something called “financial regulatory reform” may pass? Or is it a bad—or at least, complicated—development, because that “reform” may not amount to much?

The Associated Press took the first option, headlining its story, “Dodd Retirement May Help Banking Bill.” The article opens: “Freed from his liberal base and moneyed donors, Sen. Chris Dodd can now cast himself as the honest broker in negotiations over a massive Wall Street regulation bill.”

This makes sense if you think that Dodd’s “liberal base” and his “moneyed donors” have been equally culpable in sabotaging legitimate efforts at financial reform. But the use of that dichotomy here is a little confusing: yes, Dodd’s career has been built on support from these two groups, which are at odds on this issue. But when it comes to financial reform, the important distinction isn’t liberal/rich—it’s non-rich/rich. That’s not how Wall Street presents it, though. The first two quotes in this story come from John Breaux, a former Democratic senator from Louisiana who was famously sympathetic to big business and now lobbies for the financial industry, and Scott Talbott, a lobbyist for banking trade group The Financial Services Roundtable. They’re both pleased as punch that “political motivations” will no longer be shaping the regulations; it’s that sentiment that shapes the top of the story. But here’s a tip: if those two think a news event works in their favor, that event’s probably not doing much to bolster financial reform. (The article does, farther down, talk to consumer advocates, and explore how some reform measures are likely to be sacrificed. But the main theme is that Dodd’s retirement is more likely to prompt a compromise—and that compromise is a good thing.)

Taking a similar tack was The Washington Post, which ran the somewhat wordier headline, “Dodd’s retirement decision may boost chances for financial regulatory overhaul.” The headline doesn’t quite do the story justice: the Post does a much better job explaining that there are serious competing interests at stake here, and that the value of a “financial regulatory overhaul” depends on what’s in the overhaul, and which interests you care about. Still, the WaPo story reinforces the idea that petty partisanship—rather than, say, Wall Street’s entrenched influence among both parties—is the chief obstacle to reform, and thus Dodd’s new “freedom from politics” is a good thing. The closing quote goes to Sen. Mark Warner (D-Va.), who says, cheerily, “If this removes one level of the partisan concerns, so much the better.”

A different—and better—take comes from The Wall Street Journal, which signals its stance right in the headline: “Dodd’s Retirement Muddles Financial Overhaul.” Reporter Damian Paletta gets right to the point:

If Mr. Dodd wants to pass the bill by November to bolster his legislative legacy, Capitol Hill aides said, he and the White House will likely have to water down their proposals and broker a deal with Republicans, who oppose the legislation and have little incentive to give Democrats a victory.

“If Dodd still wants a bill, he can get one; he just has to compromise much more than he would have had to before,” said Mark Calabria, a former Senate Republican aide who is now director of financial-regulation studies at the libertarian Cato Institute think tank. It’s a view echoed by liberal consumer groups.

That Calabria quote does a lot more to help readers understand the situation than the AP odes to bipartisanship from Breaux or Talbott. In fact, Paletta appropriately kicks the quotes from interested parties—both bankers and consumer advocates—to the end of the story. Near the top, though, he offers this tidbit:

Financial executives were mostly measured in their public reaction to Mr. Dodd’s announcement. But privately, several said any legislation that passes will likely be more industry-friendly than what was under consideration even a few weeks ago.

(For one example of a not-so-private—but still anonymous—remark in this vein from a lobbyist who thinks Dodd’s populism was all for show, see this item by Politico’s Victoria McGrane.)

Before joining the Journal, Paletta worked for three years for American Banker. Maybe there’s something salutary about working in the trade press, because Stacy Kaper did a solid job with this same story for that publication. Here’s her lede:

WASHINGTON — Senate Banking Committee Chairman Chris Dodd’s decision not to seek reelection strengthens his ability to enact regulatory reform, but the final bill is also expected to be more moderate, observers said Wednesday.

Removing the campaign pressure of fighting to keep his seat will let Dodd fully focus on reform — and his legacy. But it also probably strengthens the hand of Republicans and moderate Democrats who want to tone down the bill.

This captures the shifting power dynamic in a nutshell. (So does the headline, which forecasts that reform is now “more likely” but “less potent.”) Farther down, Kaper offers good details about the likely fate of various measures. And, like Paletta, she gets a good quote from Mark Calabria, who notes here that moderate Democrats are also unlikely to support Dodd’s initial proposal.

Covering financial reform is a classic opportunity for the press to, as CJR’s Brent Cunningham has urged, “take a stand” on behalf of the public, whose interests—across ideological lines—are shortchanged in a political environment shaped by the power of money. But even if reporters are reluctant to do so, the public still deserves straightforward, accurate explanations of the various political interests competing over important issues. In the case of financial reform, it’s not enough to simply celebrate the idea that legislation is more likely—what’s important is what will be in the legislation, and who will benefit most from its passage. A story that doesn’t hit those points clearly is letting its readers down.

Update: Jim Kuhnhenn, author of the AP story discussed here, sends along via email a link to another version of his article. Here’s how it opens:

WASHINGTON — Sen. Christopher Dodd’s decision to retire at the end of the year increases the chances of a Senate overhaul of Wall Street regulations that is bipartisan and friendlier to the financial sector than what President Barack Obama may want.

Political strategists from both parties and financial sector lobbyists say Dodd, the chairman of the Senate Banking Committee, is now free from re-election considerations and fundraising demands to cut a deal with Republicans without fear of alienating liberal voters.

…The decision also dilutes the influence of financial sector executives and hedge fund managers who have regularly filled Dodd’s campaign treasury with donations. That could make it easier for Dodd to insist on requirements that banks put more of their money at risk when they make loans and that regulators have more control over previously hidden financial transactions.

To my eye, that’s better. It offers a somewhat different read on Dodd’s motivation than some of the other stories, but it’s one that, given his record, makes sense. It makes more sense of the liberal base/moneyed donor dynamic. And most importantly, it makes clearer to readers how the balance of power in this debate is shifting, and whose interests are being favored.

According to Kuhnhenn, this version of the story moved on Wednesday for Web and print, so it’s what newspaper readers would have seen Thursday. The version cited in this column moved overnight Wednesday-to-Thursday for the Web; it is currently the one featured at the AP site.

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Greg Marx is an associate editor at CJR. Follow him on Twitter @gregamarx.