Democrats - Playing Politics With Bills ahead of Elections

The Obama administration doesn’t love it. Senate Democrats aren’t wild about it, either. Even respected financial watchdogs like Paul Volcker oppose it.

But a controversial proposal by Sen. Blanche Lincoln (D-Ark.) that would force investment banks to spin off their derivatives businesses appears to enjoy a quirky protected status until Tuesday — primary election day in Arkansas, when Democrats decide if Lincoln can go for a third term.

Trying to shore up her left flank, Lincoln went further than the White House, the House and the Senate Banking Committee to crack down on derivatives, the complex financial instruments at the heart of the 2008 economic crisis.

And Lincoln’s in no mood to compromise just days before her May 18 primary. So Democratic leaders have held back from going too far to force changes in her bill and risk embarrassing Lincoln ahead of the vote, according to multiple Senate aides and industry officials familiar with the negotiations.

The upshot is that a major provision of the regulatory reform bill is in limbo, the consequence of a toxic election year for incumbents. - Politico Story