By Ryan Grim. Politico.

An easy way to score political points is to lash out at China for artificially depressing its currency to promote its own manufacturing base. Early in 2007, pushed by presidential contenders and congressional leaders, the issue appeared to have political momentum. Yet the effort in Congress to punish China for currency manipulation has gone nowhere fast, the victim of an old-fashioned Senate turf war — with a dose of Wall Street lobbying thrown in.

Sens. Charles Schumer (D-N.Y.) and Lindsey Graham (R-S.C.) teamed up to write legislation that would essentially require the Bush administration to find China guilty of manipulating its currency and to implement penalties. The top two members of the Finance Committee — Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) — joined the effort, and a Schumer-Graham-Baucus-Grassley bill was introduced on June 13, 2007. With those four behind it, the bill seemed destined to move quickly.

But Banking, Housing and Urban Affairs Committee members didn’t take kindly to what they saw as unwanted help in their neighborhood. Chairman Chris Dodd (D-Conn.), then running for president, rushed out his own bill a week later, although it didn’t include penalties.

“The banking guys are chapped. I’d be chapped, too, if I were them,” said Lloyd Wood, a spokesman for the American Manufacturing Trade Action Coalition, which has been lobbying for action on Chinese currency. As the legislation has lingered, China’s currency has appreciated significantly against the tumbling dollar, further relieving pressure.

The competition between the bills has prevented either from being considered on the floor.

Senate Majority Leader Harry Reid (D-Nev.) has told both sides that neither bill will move until compromise is reached. Meanwhile, the House has taken little action on its bill, giving Reid little incentive to break the logjam.

“If you’d told me the day after the 2006 elections that we’d be sitting here [in May 2008] with no China bill having passed the House, I’d have laughed you out,” Wood said.

Further complicating the political calculus: Sens. Barack Obama (D-Ill.) and Hillary Rodham Clinton (D-N.Y.) are backing a tougher third bill, pushed by Sens. Debbie Stabenow (D-Mich.) and Jim Bunning (R-Ky.).

The currency issue plays well in swing states with deep manufacturing bases, such as Michigan, North Carolina, Pennsylvania and Ohio.

The combination of the external and internal politics has the bill stuck. Asked whatever happened to his currency manipulation bill, Dodd laughed. “That’s a good question,” he said. “I’ve got to talk to Max Baucus. We’ve got to sit down. We need one bill. We don’t need two bills,” said Dodd, the senator who introduced the second bill.

Schumer said he’s hopeful that the sides will soon come together. “Baucus and Dodd have agreed on the banking and finance committees to come up with some solution,” he said. “Theoretically, they’ve agreed to have a meeting. Now they’ve got to get it done.”

Schumer, who appreciates the political weight the issue has in some states, has a tight line to walk, too, representing upstate New York’s manufacturing areas as well as Wall Street. The banking industry sees in China the possibility for lucrative long-term financial partnerships, both with Chinese firms and consumers. Because of the high savings rate in China — a product of both culture and an immature financial services sector — the Chinese people have serious capital to spend and invest. “There are billions and billions, maybe trillions, in mattress money in China,” said W. Taylor Griffin, senior vice president for communications at the Financial Services Forum, a large Wall Street trade association.

With so much at stake, Wall Street doesn’t want to anger a potential partner. “Obtaining greater access to the Chinese market for U.S. firms holds greater promise for long-term economic growth and job creation in the U.S. We believe that engagement is the best way to achieve this goal,” Griffin said.

Baucus said that there is no bad blood among senators on the issue and that he’ll meet with Dodd as soon as the banking chairman has time. “We haven’t met in some time, frankly. Now that Sen. Dodd’s involved in this banking bill right now, when he gets a little time, we’ll sit down and talk,” he said.

Graham finds the dispute amusing, if unfortunate. “We went from having [a situation in which] you couldn’t get two people — couldn’t get too much interest — to everybody’s got a bill. And so me and Schumer have become the moderates on this,” he joked. “Everyone’s trying to outdo us, but I hope we can find a compromise between the two committees.”

Since the start of the feud, the political turf in which the issue is planted has become less fertile. Forcing China to raise the value of its currency could translate into higher prices for U.S. consumers of Chinese goods. As food and gas prices soar, a policy that could raise prices even more is tougher to sell.

But backers of the bills — both bills — said it’s worth the cost. Although he conceded that there would “absolutely” be some short-term pain for consumers, Graham said that manufacturing industry growth would make up for it in the long term. “If you want to sit on the sidelines and watch a power like the government of China manipulate its currency to be able to create an advantage in commodities and exports, you do so at your own industrial base’s detriment,” he said.

Dodd conceded that fear of a price increase is a “good point, and it’s a legitimate one,” but he said that opening China’s market to U.S. manufacturers “trumps” those concerns.

Before the policy arguments can be worked out, however, the senators will have to agree on who will carry the bill. “The banking committee really has jurisdiction, but we are concerned about it because of trade,” Grassley said, before adding one more reason his finance committee is working on its own bill: “I suppose also because Schumer’s on our committee.”