The Senate on Thursday approved far-reaching new financial rules aimed at preventing the risky behavior and regulatory failures that brought the economy to the brink of collapse two years ago and cost millions of Americans their jobs and savings.
The final vote, just after 8:30 p.m., was 59 to 39. Four Republicans voted in favor of the bill, and two Democrats opposed it, including Wisconsin’s Russ Feingold.
Feingold and Democratic Sen. Maria Cantwell of Washington voted against the legislation because they said parts of it did not go far enough.
After the vote, Majority Leader Harry Reid, D-Nev., said, “When this bill becomes law, the joy ride on Wall Street will come to a screeching halt.”
The 1,500-page measure, shepherded through the Senate by Christopher Dodd, D-Conn., chairman of the banking committee, seeks to reshape both Washington and Wall Street.
In providing for the most profound remaking of financial regulations since the Great Depression, the legislation would create a new consumer-protection watchdog housed at the Federal Reserve to prevent abuse in mortgage, auto and credit card lending. It also would give the government power to wind down large failing financial firms and set up a council of federal overseers to police the financial landscape for risks to the global economy. Moreover, the legislation would establish oversight of the vast market in financial instruments known as derivatives, impose new restrictions on credit rating agencies and give shareholders a say in corporate affairs.
Passage of the measure marks a milestone in President Barack Obama’s efforts to tackle the financial abuse and excess that contributed to the crisis and prevent another meltdown.
The vote gives Obama his second major legislative victory of the year, following the March passage of his landmark health care bill. “Our goal is not to punish the banks,” he said in the White House Rose Garden hours before the final vote, “but to protect the larger economy and the American people from the kind of upheavals that we’ve seen in the past few years.”
The bill now appears headed to a House-Senate conference committee, where a handful of lawmakers will work to resolve differences between the two chambers. House Financial Services Chairman Barney Frank, D-Mass., said he aims to wrap up that task in short order.
“I think the president will sign this bill before the Fourth of July,” he said.
Thursday’s vote hinged in large part on Democrats’ ability to win over key Republicans.
Leaders successfully courted GOP Sens. Olympia Snowe and Susan Collins, both of Maine, in part by including in the final bill provisions that each wanted. Sen. Charles Grassley, R-Iowa, also backed the bill. Equally critical was the last-minute push to win over Republican Scott Brown, the Senate’s newest member.
Brown’s vote was secured partly through the help of Frank, his Massachusetts colleague. In an interview, Frank said Brown called him Wednesday evening as Frank was working out on the elliptical machine in the House gym. Brown wanted assurances that Frank would fight in conference to preserve provisions in the House bill that protect large and solvent Massachusetts institutions, such as State Street and Fidelity, from “unnecessary intrusion” by government regulators. Over the next 24 hours, Frank sent Senate leaders two letters stating his position, and Brown indicated that “on that basis, he could vote for cloture,” Frank said.
Consumer advocates who pressed for tough regulations said that the bill falls short in places but that they are delighted it passed.
“No bill that deals with big issues is ever perfect, but the Senate’s Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees,” Elizabeth Warren, head of the Congressional Oversight Panel and an advocate of the new consumer watchdog, said in a statement.
But financial and business groups called the bill flawed.
“If you want to drive capital out of the United States, this is your bill,” Thomas J. Donohue, president of the U.S. Chamber of Commerce, said in a statement. “Today we have taken a significant step in the wrong direction, and it will put American companies and our financial system at a competitive disadvantage to the detriment of our long-term economic growth.”
Dodd’s bill, like the one Frank guided through the House, largely mirrors the blueprint the administration laid out last year. But it didn’t always.
Dodd’s initial draft, introduced in November, differed in significant ways from Frank’s legislation and the administration’s original vision. But after administration officials, industry lobbyists and fellow lawmakers attacked portions of Dodd’s proposal, he spent months crafting a more modest draft and trying to win Republican support. Eventually, the bill sailed through the banking committee on a party-line vote, and was sent to the Senate floor virtually untouched.
Republicans filibustered the bill at the outset, refusing to allow debate to begin. But they quickly switched course, and lawmakers considered dozens of amendments during three weeks of unusually civil debate.
Despite conventional wisdom that the bill would get watered down as it moved through the Senate, the opposite happened.
For instance, Sen. Blanche Lincoln, D-Ark., chair of the Senate agriculture committee, proposed dramatic restrictions on trading in derivatives, including a provision that could force big banks to spin off the lucrative business altogether. Her language was added to Dodd’s bill and endured, despite efforts by the administration, lobbyists and Dodd himself to temper it.
In the meantime, other senators added tough amendments that, for example, would place new restrictions on credit rating agencies, force big banks to meet higher capital requirements and limit the fees that merchants have to pay banks when a customer uses a credit or debit card.
In the final hours, a pair of issues remained unresolved. One was a Republican proposal that would exempt from new oversight auto dealers providing loans. The other, a Democratic proposal, would ban banks from making speculative investments using their own capital and from owning hedge funds or private-equity funds. Ultimately, neither came up for a vote, but the auto dealer provision could still be addressed in the House-Senate negotiations.