How A Primary Election In Arkansas With Bizarre Rules Could Screw Over Wall Street On Derivatives Reform

blanche lincoln

Did you realise that it’s election day this Tuesday?

Probably not, but it is; in a handfull of states, there are some key primary races to watch, including in Pennsylvania, where turncoat Senator Arlen Specter may not be able to hold the Democratic nomination against challenger Joe Sestak.

There also happens to be a primary in Arkansas, where Democratic Senator Blanche Lambert Lincoln is facing a tough fight against the state’s Lt. Governor Bill Halter.

So why is this race important? Let’s step back.

Financial reform is still winding its way through the Senate with various amendments being either tacked on or shot down. So far nothing too radical has passed. As we’ve noted Senator Lincoln has proposed one of the toughest amendments yet — a bill that would force all banks to end any dealings with derivatives.

It’s a plan that’s opposed by almost everyone, including most notably Paul Volcker, who nobody would mistake for a Wall Street shill.

The amendment was clearly intended to give her some cred on the left, in the middle of her bruising primary fight. What it wasn’t intended to do, apparently, was actually pass.

But there’s a hitch!

As David Dayen at FireDogLake notes, the basic Democrat plan is to keep the bill on the table, wait for her to win her primary, and then water it down. But under Arkansas rules, she can’t just win her primary with a plurality of the vote. She has to win over 50%, and the presence of a third candidate is making that less and less likely. In that case, her primary battle gets extended to a June 8 runoff, beyond when the White House hopes to have this all wrapped up.

If this happens, and the Senate still intends to continue, as Dayen puts it, the “Kabuki” dance of pretending the Lincoln amendment is a serious proposal, it means a long drawn out joke, while Republicans hammer the Democrats of blatantly playing politics on a serious issue.

Obviously it’s still possible that Lincoln wins outright, and the very next day the bill gets watered down and that’s that (though it doesn’t bode very well for her prospects in Novemer, but hey, at least she’s alive to see that day).

Still, it’s hard to see the amendment in the final bill with the kind of opposition it faces. This just shows the danger of trying to walk a political highwire during such a crucial issue.

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