Brian Beutler June 22, 2010, 10:49 AM

In a last-ditch effort to block Wall Street lobbyists from securing another major loophole in financial reform legislation, one of the authors of the so-called Volcker rule is publicly and privately pressuring top negotiators to buck the banks and keep the proposed new rules as strict as possible. He’s also casting doubt on those who say the bill won’t pass if they don’t do as the bankers say.

“There’s people [on the conference committee] who favor it,” Sen. Carl Levin (D-MI) told TPMDC yesterday evening in a brief interview. “I hope they’re not going to accept it.”

Levin and Sen. Jeff Merkley (D-OR), are the principal authors of legislation to strictly limit banks’ and other financial firms’ ability to make speculative trades with their profits. The idea originated with former Fed chair and Obama economic adviser Paul Volcker, who strongly backs the Levin-Merkley proposal. But they’re fighting Wall Street and an array of Democrats negotiating the final bill, who want to include a loophole that would allow banks to invest a potentially significant share of their capital in high-risk hedge funds. Levin and others are pushing back, but their time is limited: the conference committee will discuss the Volcker rule and the banks’ new favorite loophole tomorrow.

“Senator Merkley and I have had discussions expressing our point of view,” he added, declining to divulge details of his private conversations.

Aides and members insist it’s not just banks pushing for the exemption. They claim that political math in the Senate has given Sen. Scott Brown (R-MA )— who supports the loophole — veto power over the entire reform bill. Brown was the 60th vote for the Senate’s legislation and has threatened to bolt if the loophole isn’t included. Brown’s defection would rob Democrats of the supermajority they need to break a filibuster.

Levin says he doubts Brown is the new decider.

“I assume that there’s going to be some other Republicans that will vote for a conference report on financial reform,” Levin said. “It’s hard for me to believe that in this setting that there’s not going to be some Republicans, at least, that will vote for reform of Wall Street…. If that’s true, it means that one person — one Republican — is not going to be able to have that kind of impact.”

In a bid to limit Brown’s leverage, pro-reform groups are pressuring Sen. Russ Feingold (D-WI) — who cast a protest vote against financial reform from the left — to support the final legislation if a strong Volcker rule is included in the conference report.

If Brown isn’t going to be the 60th vote for the bill, one has to wonder why Democrats are considering weakening the bill in the first place.

“You’d have to ask them,” Levin said.

Carl Levin, Financial Reform, Jeff Merkley , Paul Volcker, Scott Brown, Volcker, Volcker Rule, Wall Street