Pres. Obama’s State of the Union speech highlighted financial reform as a priority this year, but the Financial Times reports on an unexpected obstacle:

A proposal by former Federal Reserve Chairman Paul Volcker to limit bank’s proprietary trading will be either be dropped or significantly modified in the Senate, lawmakers and staffers told dealReporter.

***

With the election of Republican Scott Brown to the Senate, the Democrats no longer have the necessary 60 votes to force through a Regulatory Reform package, and any bill will need at least some Republican support to pass. A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform.

“Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan,” the staffer said. “He is not going to risk bipartisan support to make the White House happy.”

The Democratic staffer said there is an ongoing debate among members of the banking committee about whether the Volcker rule would effectively push risk out of regulated markets and thus ultimately create more risk to the financial system.

TIME’s Joe Klein engages in some hackery (e.g., overlooking that the Democrats and Wall Street are joined at the hip), but ends up stumbling near the likely truth:

There are some bipartisan gestures worth making–if you could get Republican votes for health care by offering tort reform, do it! But the Dodd cave not only sacrifices good law, but also good politics. The good law part of it is the most important: banks shouldn’t be allowed to play private Ponzi-games (like credit-default swaps on mortgage packages) with their depositors’ money–that’s the so-called Volcker rule. (In fact, real regulatory reform would tax financial derivatives transactions.) This is just common sense after what we’ve been through.

The politics is also straight-forward: Anything that lashes the Republicans to their natural allies on Wall Street is good for the Democratic Party. If Democrats are smart, they will stage vote after vote this summer on issues like the bank tax, the Volcker rule, where Republicans have to stand up and be counted yea or nay. (The President said as much in our interview a few weeks ago.) Does anyone doubt that this is what Republicans would do if the situation were reversed?

But Chris Dodd wants his legacy. Or, perhaps, he just wants a nice, cushy bank job after he retires.

Dodd may not be angling for a bank job, but the sort of guy who got a sweetheart mortgage from Countrywide — and a sweetheart deal on an estate in Ireland (from an inside trader for whom Dodd secured a pardon) — might be looking to be a lobbyist for banks. That’s all clout, without any of the icky math.