Kennedy: Health Care Loses a Champion

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"Both sides will step back and say, 'What's really important here?' " Jennings says. "I suspect in Congress there will be a cadre of serious legislators who will want to build on the Kennedy legacy of getting things done."

Impact on Financial Services

And what of other issues? Labor unions, whose packed agenda for the Administration is topped by the desire to win passage of stalled legislation aimed at making it easier to unionize, have lost one of their staunchest backers in the capital.

Kennedy was also a co-sponsor, along with Senator John McCain (R-Ariz.), of the last significant bipartisan effort to accomplish comprehensive immigration reform. Those efforts collapsed a little over two years ago amid significant disagreements, but President Obama has promised to tackle the issue again. With the congressional agenda already overcrowded and discussions just beginning to get under way, that's unlikely to happen until next year at the earliest. But given the enormous differences that remain on how to deal with such sensitive issues as treatment of the millions of immigrants who are illegally in the U.S., Kennedy's absence could make bridging those gaps even more difficult, as well.

Kennedy's passing could also have major implications for the financial-services industry and the prospects for regulatory reform. Brian Gardner, a Washington policy analyst for institutional broker Keefe Bruyette & Woods (KBW), points out that Kennedy was one of the prime backers in the Senate of efforts to strip government subsidies for private firms that provide student loans; instead, he favored shifting the funding to direct loan programs run by Uncle Sam. Those efforts could lag without Kennedy at the helm of the Health and Education committee. "It is not clear that his successor at the HELP Committee will be as successful as Kennedy has been in reducing (the private lending program)," Gardner said in a note to clients on Wednesday morning.

Tim Johnson Next in Line

Moreover, the need to fill Kennedy's slot at the head of the committee could set off a chain reaction among other committee jobs, the most important of which would be the Senate Banking Committee. Currently, Senator Chris Dodd (D-Conn.) heads that committee, which will play a critical role in the upcoming battles over financial regulatory reforms. But Dodd has been running Health and Education for Kennedy in recent months; if he opts to take on that chairmanship permanently, he would have to give up his role on the Banking Committee.

He could be replaced by one of several contenders. Gardner points out in his client note that Senator Tim Johnson of South Dakota, one of the most conservative Democrats in the Senate, is next in line. He is much closer to the banking industry than Dodd has been, Gardner argues; were Johnson to get the nod, he would likely be much less supportive of proposals for a new consumer protection agency than Dodd would be. He has also generally been less critical of the credit-card industry, which has a major presence in Johnson's home state.

That assumes, of course, that Johnson would get the job should Dodd decide to switch hats. Others, however, believe Rhode Island's Jack Reed or New York's Schumer could make a bid for the job. With a decision unlikely until sometime in September, the uncertainty over the impact of Kennedy's death on the Democrats' fall agenda will continue for a while.

Sasseen is Washington bureau chief for BusinessWeek.

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