Chris Dodd remains buried in talks with Republicans on Wall Street reform. Were he to reach a deal with them, it would be expected that the GOP would demand no amendments changing the bill in exchange for their support, which could essentially close up the bill and not allow for any improvements on the floor. By contrast, Senator Jeff Merkley, a member of the Banking Committee, wants to open up the Wall Street reform bill to a full debate with a majority-vote amendment process.

In an exclusive interview with FDL News, Senator Merkley said that the process of debate and amendment in the health care process, where Republicans would not allow unanimous consent on amendments unless a 60-vote super-majority was required, amounted to a “travesty for democracy.” He would be pushing for a number of amendments, Democratic and Republican, to be debated on the floor of the Senate and to get a vote. Anything less would not be true to the Democratic process.

This is a problem that cuts both ways. Merkley has led in pointing out that Republican obstructionism of the Wall Street reform bill represents an effort to secure concessions in private. “The debate needs to be in public. The Republicans are voting against a public conversation and trying to make deals behind closed doors,” Merkley said. And he supported the efforts of Majority Leader Reid to make the GOP vote for secrecy and backroom deals over and over again. There is motion to reconsider scheduled for today, and Reid re-filed cloture yesterday, meaning that he could bring up the motion to proceed again for a vote tomorrow.

But there are two parties at the bargaining table, and if Chris Dodd reaches agreement with Richard Shelby and the rest of the GOP, there is sure to be pressure on Democrats to honor the deal and not present the type of amendments that would potentially scuttle it.

Merkley didn’t sound willing to go along with that process. “We should have a Democratic amendment and a Republican amendment, an hour for debate, and a vote, and go on like that,” he said.

In particular, Merkley highlighted two of his amendments that he would be offering once the motion to proceed passes. One is a technical fix designed to “make sure there’s no pre-emption of state insurance regulations.” There is an Office of Insurance in the Wall Street reform bill; Merkley’s amendment would tighten up the language around that.

The other, more well-known amendment Merkley is carrying along with Sen. Carl Levin and 11 co-sponsors, would accomplish three basic goals:

1) “It would say that high-risk investing doesn’t belong in commercial banks,” Merkley said, essentially explaining the end of proprietary trading. “Banks get access to the discount window and guaranteed deposits, and that’s designed to encourage lending and not speculative trading.”

2) “It would say to non-lending houses that, as their portfolio grows, they need to set aside more capital,” although the specific capital requirements would be left up to regulators within certain guidelines.

3) “We take on the conflict of interest of an investment house selling a security and then betting against it.” This is precisely what Sen. Levin has been consumed with in the Goldman Sachs hearings today, and the Levin-Merkley amendment would try to deal with that in some way.

“What we want to do is prevent the next crisis on the front end and not the back end,” Sen. Merkley told me. The draft bill from Chris Dodd has been criticized for having a more reactive approach. However, Merkley cautioned, despite all of these new rules, “you still need regulators who believe in regulating.” He said a mix of lax regulatory oversight and statutory weakening of the rules led to the crisis, and both needed to be strengthened in order to prevent it from happening again.

Merkley did get in a shot at the Federal Reserve, however, for their particular failures in oversight. “All of this was premised on trading in subprime mortgage securities, especially the new products in 2003, with the no money down and teaser rates. If the Fed had done its job on consumer protection, we never would have had this mess.” I asked if he was confident that the consumer protection bureau housed within the Fed would be independent enough to do the job, and he replied, “I would much prefer it not to be at the Fed. But this is a different creature, with independent funding and independent rulemaking. We should go the whole way and make it an independent body.”

I asked Sen. Merkley if he caught any of the Goldman Sachs hearings today, and he said he only saw about 10 seconds of Claire McCaskill’s questioning. I asked him what possible social utility can be served by Goldman betting against securities they created, or making bets on positions they don’t hold. He had no answer. “You’re absolutely right, it’s outrageous.”

UPDATE: Sen. Merkley expands upon this in a guest post at Eschaton.