If this isn’t a Lucy-with-the-football moment, I don’t know what is.

Brian Beutler reports that Hill aides told him President Obama’s Treasury Department sided with Scott Brown in the waning moments of the Wall Street reform conference committee, favoring his loophole for the Volcker rule designed to help asset management companies in Massachusetts. In the process they shot a giant hole through the efforts to stop the mega-banks from investing in private equity or hedge funds, allowing them to use up to 3% of Tier One Capital. Even the two main Senators involved in crafting a strong Volcker rule, Carl Levin and Jeff Merkley, consider the “de minimus” exception a “flaw” that is “problematic,” though they highlight other protections and provisions on proprietary trading. The point is, if you asked them whether they favored the Brown loophole, they would have said no. And at the key moment, the Obama Treasury Department stood with Scott Brown and carried the loophole over the line.

“Treasury’s official position went from opposed to [the loophole] to supportive,” one aide says. “They may have [even] overshot Brown’s desires by a bit.” [...]

In siding with Brown, the administration tacitly accepted that Sens. Russ Feingold (D-WI) and Maria Cantwell (D-WA), who opposed the bill from the left, would continue to oppose it after the conference committee. From the outset of the 111th Congress, Senate leaders and the White House frequently tailored legislation to the demands of conservative Democrats and moderate Republicans who, in their view, hold the keys to breaking filibusters. In the weeks since the Senate financial reform bill passed, communication between top Democrats and Feingold and Cantwell had largely stalled, while Brown remained at the center of the action — and his central focus was on retaining his hedge fund loophole.

The giant punchline to all this? Brown could very well vote against the conference report because of its four-year, $19 billion dollar bank levy to cover implementation. So the White House put all their eggs in the Scott Brown basket to ensure passage, and now he’s wavering. Meanwhile, having weakened the bill’s most significant provision, the one they touted since January, Russ Feingold won’t be bailing them out, as he announced his continued opposition to the bill.

“As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee’s proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up ‘too big to fail’ Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.”

Cantwell’s position remains unknown, as does Chuck Grassley’s. They are basically the only two gettable votes left, and given Robert Byrd’s death and Brown’s potential opposition, both would be needed.

Maybe next time, the Obama Administration will stop thinking they can fulfill the every whim of politicians committed to their defeat. They’ll unquestionably try to blame Cantwell and Feingold for not using their leverage. But clearly, the White House wasn’t particularly interested in appeasing them, and they got played by Scott Brown.