U.S. financial reform no longer a done deal

The political calculus for U.S. financial reform is suddenly more complicated. Last Friday’s 5 a.m. Capitol Hill compromise was meant to be the culmination of months of hard-fought wrangling. But Republican Scott Brown’s wavering and Democrat Robert Byrd’s death put the proposal back in jeopardy.

The legislation hammered out by congressional negotiators last week still needs to pass both chambers in Congress. In the Senate, it had been expected to get 60 votes, the exact number needed to defeat any Republican attempt to kill it. But few thought the bill would contain a $19 billion assessment over four years on financial firms, designed to pay for the new rules.

For Brown, the junior senator from Massachusetts who consented to an earlier version of the bill, the surprise addendum might be a poison pill. First, he has ruled out voting for any new taxes. Second, the fee might be interpreted as hitting mutual fund firms such as Boston-based Fidelity Investments.

If Brown defects, then Democrats would need to turn one of the two members of their party who voted against the earlier Senate version of the bill — Wisconsin’s Russ Feingold and Washington’s Maria Cantwell. The White House would try to argue that the bill had become tougher in the House-Senate conference committee. But if only one of them switched positions, the bill would still be temporarily a vote short of 60 thanks to the passing of West Virginia’s Byrd.

Here’s where it gets tricky. If that state’s Democratic governor immediately appoints a replacement for Byrd so that his or her vote can count in the Senate this week, there might have to be a special election this year to pick a successor to fill the remainder of the term. If he waits until July 3 or later to appoint a successor to Byrd — potentially missing the vote — no election would have to take place until 2012, a safer political option for Democrats.

With the Senate about to go on a week-long holiday, the second option would risk delaying final passage of the bill and its signing into law by President Barack Obama. That interregnum might give Republican leaders enough time to change a few minds their way. With votes unexpectedly scarce, Obama has more work to do if he wants a bill ready for his signature.