Dodd’s Exit Provides a Private Sector Opportunity – One Way or Another

Authored By: Michael Robinson
January 6, 2010

With the news that Senator Chris Dodd (D-CT) will not seek a sixth term in the U.S. Senate, the financial services industry now has good – but rapidly expiring – opportunity to take a greater hand in the expected regulatory overhaul of their own industry.

For some time, Sen. Dodd, who serves as the Chairman of the Senate Banking Committee, has been a proponent of far-reaching reforms including executive compensation limits, the creation of a Consumer Financial Protection Agency (CFPA), consolidation of banking industry regulators, and measures aimed at reigning in the practices and exotic financial instruments that many believe led to the recent global financial meltdown. With a few notable exceptions, those proposals have met with much private sector resistance. Nevertheless, Senator Dodd stayed the course.

Now, some observers believe that the fate of any proposed legislation reflecting Senator Dodd’s prerogatives hinges on a key consideration: Will he go quietly into retirement from public life, or will he spend the next 12 months championing a bill that could very well define his legacy, without regard for the political toll it might exact? It is indeed an interesting question. But either way, Senator Dodd’s impending exit provides impetus for the financial services industry to take steps now that articulate a strong commitment to self-regulation.

If Senator Dodd opts for a quiet exit and his legislative priorities fall by the wayside (even if only temporarily) it provides an ideal opportunity for banks and Wall Street to announce plans to regulate themselves, rather than wait for the heavy hand of Washington to do it for them. If the private sector demonstrates tangible progress on issues of compensation, systemic risk, consumer protection, and the myriad other issues raised throughout the recent period of economic turmoil, legislators who may have been inclined to pick up where Dodd left off would likely have fewer reasons to take up his mantle – and thus less to gain in doing so.

If Senator Dodd decides instead to continue leading the charge, then the self-regulating steps outlined above only serve to strengthen business’ position at the negotiating table. The tandem of a hard deadline for passage and the growing perception that industry is, in fact, able to adequately police itself could provide the Senator with ample reason to abandon his hard-line stance and agree to the more measured approach that many in the banking industry have advocated.

No matter how Senator Dodd ultimately decides to spend his last year in office, now is the time for the financial services industry to show that it can do for itself what many believe only Washington can accomplish. The door may be open – but it likely won’t remain so for much longer.

Michael W. Robinson is a Senior Vice President and Chair of the Corporate Practice at Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

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For some time, Sen. Dodd, who serves as the Chairman of the Senate Banking Committee, has been a proponent of far-reaching reforms including executive compensation limits, the creation of a Consumer Financial Protection Agency (CFPA), consolidation of banking industry regulators, and measures aimed at reigning in the practices and exotic financial instruments that many believe led to the recent global financial meltdown. With a few notable exceptions, those proposals have met with much private sector resistance. Nevertheless, Senator Dodd stayed the course.

Now, some observers believe that the fate of any proposed legislation reflecting Senator Dodd’s prerogatives hinges on a key consideration: Will he go quietly into retirement from public life, or will he spend the next 12 months championing a bill that could very well define his legacy, without regard for the political toll it might exact? It is indeed an interesting question. But either way, Senator Dodd’s impending exit provides impetus for the financial services industry to take steps now that articulate a strong commitment to self-regulation.

If Senator Dodd opts for a quiet exit and his legislative priorities fall by the wayside (even if only temporarily) it provides an ideal opportunity for banks and Wall Street to announce plans to regulate themselves, rather than wait for the heavy hand of Washington to do it for them. If the private sector demonstrates tangible progress on issues of compensation, systemic risk, consumer protection, and the myriad other issues raised throughout the recent period of economic turmoil, legislators who may have been inclined to pick up where Dodd left off would likely have fewer reasons to take up his mantle – and thus less to gain in doing so.

If Senator Dodd decides instead to continue leading the charge, then the self-regulating steps outlined above only serve to strengthen business’ position at the negotiating table. The tandem of a hard deadline for passage and the growing perception that industry is, in fact, able to adequately police itself could provide the Senator with ample reason to abandon his hard-line stance and agree to the more measured approach that many in the banking industry have advocated.

No matter how Senator Dodd ultimately decides to spend his last year in office, now is the time for the financial services industry to show that it can do for itself what many believe only Washington can accomplish. The door may be open – but it likely won’t remain so for much longer.

Michael W. Robinson is a Senior Vice President and Chair of the Corporate Practice at Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog.