Folks who were hoping that a lame duck Dodd would be more inclined to push for more aggressive financial regulatory reform should be disappointed to hear that Dodd, who chairs the Senate Banking Committee, is now considering negotiating away creation of a Consumer Financial Protection Agency in an attempt to win over Republican senators. Actually, all of us should be disappointed. What’s as discouraging as the move is the motivation: Dodd is saying he wants a financial regulatory reform that Richard Shelby, the ranking Republican on the committee, can support. He’s created a team of four Democratic senators and four Republicans to try to hash out a deal.

Does this sound familiar to anyone? Dodd and Shelby seem to be reading from the Max Baucus – Charles Grassley script that consumed the healthcare process in the Senate for long enough that now a special election result in January has the chance to blow up the bill again. What did they get to show for it? Olympia Snowe voted the bill out of the Finance Committee but then voted with every other Senate GOPer to declare it unconstitutional.

What’s most frustrating about this is that it’s just bad negotiating. Chris Dodd only weakens his position by giving Richard Shelby (and thus Mitch McConnell) a veto over financial regulatory reform. Republicans have no motivation to help Democrats pass a strong bill regulating the banks – first, because Republicans are in bed with the banks, and second, because Republicans want to keep bashing the Democrats for being in bed with the banks (a strategy which is paying off, judging by the polls in Massachusetts).

Even if the Democrats are desperate for Republican votes (whether to give moderate Democrats cover, to make up for Democratic defections, or to earn a bipartisan aura), the best way to get them is to show you’re ready to pass a bill without them. Then there’s a shot a Republican offers to support a weaker version. The worst strategy to win Republican votes is to try to show how reasonable you are by offering them veto power in exchange for being willing to talk to you. We call that negotiating against yourself.

And as Matt Yglesias observes, there are worse things that could happen than a Republican filibuster of financial regulatory reform.