The Senate last week agreed to an amendment to the financial regulation bill, S. 3217, sponsored by Sen. David Vitter (D-LA) and Sen. Mark Pryor (D-AR). As The Wall Street Journal explained:

The measure restricts the Fed’s regulation to companies “predominantly engaged” in financial services, defined as those where at least 85% of annual revenue or consolidated assets come from activities related to finance.

The Journal chose the angle that the amendment exempted GE Capital Services, but the measure has value for other larger manufacturing companies that have developed their own financial opreations. Sen. Vitter issued a statement that makes the point:

“The Fed should not be regulating firms outside of its area of expertise, which is a practice that would only weaken our financial system. Sen. Pryor shared my concerns that previous language of the bill gave the federal government far too much power to grab control of the economy, and we’re pleased that our Senate colleagues agreed to adopt our amendment to focus this legislation on truly financial companies,” said Vitter.

Before the bipartisan Vitter-Pryor amendment, the language of the financial reform bill would have allowed virtually any large company engaged in broadly defined “financial activities” to be designated by the council for enhanced supervision by the Federal Reserve. That language would create an opening for the council to designate non-bank financial companies for enhanced supervision so they could be charged assessments to pay for future banking crises.

Sen. Pryor also issued a statement, in which he said:

Under this bill, we need to fix what’s broken, and leave manufacturing companies, retailers and other non-financial companies alone. They were not part of the problem and should not be subject to enhanced supervision by the Federal Reserve. Our amendment simply clarifies that banks and financial companies deserve a higher threshold of review, while companies like Home Depot, Sears, Wal-Mart or Dillards don’t.

Writing at BigGovernment.com, John Berlau at the Competitive Enterprise Institute describes the political dynamic that helped win passage of the Vitter amendment. No matter the real target, the “progressives” will attack big business, he warns, but the attacks can be warded off.

The lesson from the fight for Vitter’s amendment – which was assisted by support from the measure by the U.S. Chamber of Commerce, the National Association of Manufacturers and many businesses large and small, as well as a Center-Right coalition letter signed by CEI and other groups that specifically called out the bill’s broad definition of financial company– is clear. From health care to financial regulation, the progressives will paint the enemy as unpopular big business – from big insurers to big oil to big Wall Street firms.

But once the Center-Right forces them to debate, as the Vitter amendment did, how a particular bill would affect entrepreneurial Main Street businesses, they will duck and cover and sometimes retreat.. Despite opposition from the Huffington Post crowd and other progressives, the Obama administration and Senate Democrats made a significant concession likely because they did not want to be seen as going after the entrepreneurial firms that are rightly seen as the backbone of this country.

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