In the fight over which policy riders get into the year-end CR/Omnibus, the Democrats are bluffing left and right..
Senate Minority Leader Harry Reid has told Roll Call that his caucus is going to “hold hands” with the president and House Democrats, because they are “not going to approve anything that has all these ideological, short-sighted, crazy ideas.”
Reid was referring to GOP-sought riders on abortion, EPA regulations, and Dodd-Frank financial regulations. That’s the tell: In the brinksmanship fights of the GOP majority/Obama era, few significant ideological riders get through. It’s all small ball nowadays.
While Reid, Pelosi, and the White House insist Democrats they are seeking “clean” funding bills that lack controversy, Reid and some Democrats have been waging a quiet war to get their own riders in the CR/Omnibus.
This go-around, Reid is seeking a change to the Trust Indenture Act of 1939, or TIA. As CQ Roll Call reports:
Lawmakers are weighing changes to the 1939 Trust Indenture Act (PL 76-253) that would limit protections for bondholders from transactions — often done as part of out-of-court debt restructurings — that could limit their ability to collect principal or interest payments. The changes would focus on limiting lawsuits bondholders can file against companies to try to challenge revisions in bond payments made as part of restructurings. Backers say the change would make it easier for companies to restructure their finances outside of costly bankruptcy litigation and preserve jobs. Opponents believe the revisions would remove some of the law’s protections for minority bondholders, including public pension funds, and limit their ability to challenge actions companies make in debt restructurings that could cost them millions of dollars.
Why is Reid pushing for a change to a law that’s been on the books for 76 years? Proponents of the provision argue the change isn’t a change, per se. Rather, they argue it’s a clarification, cementing how the TIA was interpreted before a court recently interpreted the TIA in ways not beneficial to a major Reid constituency.
The Hill reports some further details:
Senate Minority Leader Harry Reid (D-Nev.) is kicking up a storm with liberals in his caucus by pushing an amendment to the government funding bill that would help Caesars Entertainment Corporation, a Nevada-based gaming giant in danger of bankruptcy. Reid is pushing to add a provision to the year-end omnibus that would help Caesars avoid bankruptcy by allowing it to restructure debt incurred by a subsidiary out of court, according to Senate and K Street sources.
One lobbyist tells The Hill that Reid’s rider could save 20,000 to 30,000 union jobs in Nevada. This is not unfamiliar territory for Reid. As majority leader during President Obama’s first term, Congress didn’t intervene to stop the Obama administration’s unprecedented involvement in the bankruptcy of GM and Chrysler.
The change to the Trust Indenture Act is, no doubt, controversial. But the White House, which is “holding hands” with Reid and Pelosi, doesn’t see it that way, as CQ Roll Call reports:
White House spokesman Josh Earnest on Tuesday did not rule out that the White House would back the rider, but said he has yet to review it. “It doesn’t sound particularly ideological to me,” said Earnest, who has said repeatedly the president would reject an omnibus spending deal with ideological riders.
Yes, Josh Earnest hasn’t reviewed it, but on its face, it sure does sound ideologically neutral! That’s because some Republicans, like Alabama’s Richard Shelby, who chairs the Senate Banking Committee, have given it a bipartisan blessing.
Complicating the matter is that the measure could also benefit for-profit colleges, a bogeyman for Democrats. Minority Whip Dick Durbin, who now carries the anti for-profit college torch of now-retired Senator Tom Harkin (D-IA), is concerned that the TIA changes sought by Reid would benefit investors in for-profit colleges, which Democrats generally go out of their way to stymie.
The Hill puts the conondrum this way:
Liberals led by Senate Democratic Whip Dick Durbin (D-Ill.) worked to pull a similar provision out of the multiyear highway bill passed by Congress last week. Sen. Elizabeth Warren (D-Mass.), who is a former Harvard Law professor specializing in bankruptcy, and Sen. Sherrod Brown (Ohio), the senior Democrat on the Banking Committee, also opposed the rider, say lobbyists working on the issue. Spokespeople for Warren and Brown did not respond to requests for comment. A K Street source said the lawmakers are leery of speaking out against the rider because Reid is championing it and they don’t want to get into a public spat with their leader. Durbin and his liberal allies were incensed because the provision would have also helped a subsidiary of Education Management Corporation (EMC), one of the largest providers of private post-secondary education in the country.
However, The Hill reports that Reid may have added a sweetener, further clarifying the change to benefit Caesars, but not the EMC:
But Reid may win the day because the rider has been amended to carve out Education Management, the bête noire of liberals, to affect only Caesars, according to a lobbyist familiar with it. If liberals are mollified, as the lobbyist predicted they would be, the provision could find a place in the omnibus without much opposition.
Senator Shelby, who supports the measure, has described the provision as “a fight between two hedge funds.” A fight in which he is choosing sides.
Twenty House Republicans, led by Kentucky’s Andy Barr, oppose the move on the grounds that adopting such a measure will usurp the authority of the Financial Services Committee. Barr organized a letter to House leadership, which he sent to Speaker Ryan and Majority Leader McCarthy.
We are writing to express our strong concerns about a proposed rider amending the Trust Indenture Act (TIA) that is being considered as part of the Omnibus appropriations package. Specifically, several Members of Congress are supporting inserting a policy rider that would retroactively narrow the rights of bondholders under the Trust Indenture Act under the guise of providing flexibility for corporate restructures. While updating this Depression-era law might be warranted, to do so through an unvetted appropriations rider would be inappropriate. It is our firm belief that any modification to the TIA, particularly an amendment that would suddenly disrupt the settled expectations of creditors who in good faith relied upon long-established features of federal securities law, should take place only after legislative hearings pursuant to regular order within the appropriate committee of jurisdiction – in this case, the Committee on Financial Services. Yet, this retroactive policy proposal has not been the subject of public hearings.
Rep. Barr, a former hill staffer, is regarded as a detail-oriented member who focuses on the nitty gritty. A pragmatic conservative who is not part of the House Freedom Caucus, Barr is working to stop a controversial measure on an arcane topic that has bipartisan support, bipartisan opposition, and practically no vetting by the committees of jurisdiction.
But will Democrats join Barr’s demand to drop the rider?
Asked whether their bosses oppose inclusion of the Reid rider in the CR/Omnibus bill, press secretaries for Senators Warren, Brown, and Durbin all didn’t respond to THE WEEKLY STANDARD by press time. Crossing leadership can be tricky business.
UPDATES: A copy of the letter is below. This post has been amended to further clarify the scope of the TIA rider.
