20 May 2010

NYT: US Senate fails to advance Financial Reform Bill

The US Senate on Wednesday rejected an effort by Democratic leaders to complete work on a sweeping financial regulatory bill as two key Democratic holdouts said it still did not tighten rules on Wall Street enough.

The Senate on Wednesday rejected an effort by Democratic leaders to complete work on a sweeping financial regulatory bill as two key Democratic holdouts said it still did not tighten rules on Wall Street enough.

 

The holdouts — Senators Maria Cantwell of Washington and Russ Feingold of Wisconsin — joined with 39 Republicans to block an effort by the majority leader, Harry Reid of Nevada, to wrap up debate on the bill. The measure would enact the most far-reaching overhaul of the financial regulatory system since the aftermath of the Great Depression.

 

Two Republicans, Senators Susan Collins and Olympia J. Snowe of Maine, voted with Democrats in favor of ending debate. And Senator Arlen Specter, Democrat of Pennsylvania, who lost his primary race on Tuesday, was not in Washington on Wednesday, denying Democrats a critical vote.

 

In that sense, Mr. Reid demonstrated to Republicans that he would have the 60 votes needed to advance the bill once he addresses the concerns of Ms. Cantwell and Mr. Feingold and Mr. Specter returns to Washington.

 

The vote was 57 to 42, with Mr. Reid switching to “no” at the last minute in a procedural maneuver that allows him to call for a new vote at any point.

 

Ms. Cantwell, in a floor speech after the vote, said she was mainly fighting for a vote on an amendment to tighten proposed rules for the trading of derivatives, the complex instruments that were at the center of the economic crisis.

 

Her proposal would make it illegal to enter into a derivatives contract that had not been cleared through an exchange, other than contracts specifically exempt from the law. It would also empower regulators and investors to stop or undo a derivatives deal if banks knowingly violated the trading requirements.

 

Without her amendment, Ms. Cantwell said the legislation would be left with a dangerous loophole. “Even something like Hoover Dam with all of the great concrete and all of the great engineering and all the great things that make that structure work, still has a problem if somebody drills a hole in the bottom of it,” Ms. Cantwell said in her speech.

 

“If you don’t have a regime of exchange trading and clearing you will have money seeping into the continuation of a dark market,” she added.

 

Ms. Cantwell said she would also like a vote on another amendment she proposed, with Senator John McCain, Republican of Arizona, that would restore the Glass-Steagall Act, which maintained a firewall between commercial banking and investment banking from the 1930s until it was repealed by Congress in 1999. In a statement, Mr. Feingold said he favored restoring that firewall.

 

“After 30 years of giving in to the wishes of Wall Street lobbyists, Congress needs to finally enact tough reforms to prevent Wall Street from driving our economy into the ditch again,” Mr. Feingold said. “We need to eliminate the risk posed to our economy by ‘too big to fail’ financial firms and to reinstate the protective firewalls between Main Street banks and Wall Street firms. Unfortunately, these key reforms are not included in the bill.”

 

Proponents of the legislation say it includes adequate safeguards that are more appropriate for the modern banking and financial industry than the old Glass-Steagall approach.

 

At a news conference after the vote, Mr. Reid criticized Republicans for standing in the way of tougher regulation of Wall Street.

 

Senator Christopher J. Dodd, Democrat of Connecticut and the bill’s main author, joined in blaming Republicans, saying they were obstructing the legislation even after having a strong role in drafting it and winning adoption of a number of amendments.

 

“Unfortunately our Republican friends took a walk on this, even on their own propositions,” Mr. Dodd said.

 

To underscore the Democrats’ point that Republicans were the ones blocking the bill, Mr. Dodd returned to the Senate floor asked for unanimous consent of the Senate to allow a vote on Ms. Cantwell’s derivatives amendment. Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, objected.

 

Democrats also said that Senator Scott Brown, the freshman Republican of Massachusetts, had broken a promise to vote in favor of ending debate.

 

A spokesman for Mr. Brown said that he voted against ending debate because the bill still needed to be improved.

 

But the disagreement that mattered on Wednesday was among Democrats, and the failed effort to close debate was a jarring setback for Mr. Reid. He proved unable to address the concerns of all of his caucus members, including some with serious policy concerns about the legislation — even as he insisted that it was time to get to a final vote.

 

Senate Democrats had emerged from a special caucus meeting on Wednesday afternoon tense and clearly divided.

 

Mr. Reid had planned to hold a vote to wrap up debate at 2 p.m., but it was postponed and the caucus meeting quickly convened after it was clear that Mr. Reid did not have the needed 60 votes.

 

Exiting the meeting, Ms. Cantwell tersely announced that she would oppose ending the debate. After doing so, she sat stone-faced at her desk in the chamber, rejecting entreaties to change her mind.

 

Republicans leaders are in no particular hurry to end debate on the bill, which they have criticized harshly this week. The Republican leader, Mitch McConnell of Kentucky, has said he expects debate to continue until next week, and given the high-stakes election year he has little reason to let Democrats move on to the next items on their agenda.

 

In a floor speech , Mr. McConnell denounced the bill, saying “it uses this crisis as yet another opportunity to expand the cost and size and reach of government.”

 

Later on Wednesday, the Senate, by a vote of 60 to 35, rejected an amendment by Senator Sheldon Whitehouse, Democrat of Rhode Island, that would have required credit card companies to comply with limits on interest rates in the states where their cardholders reside. Under current law, companies must only abide by the limits in the state where the company is located.

 

© New York Times