Debate to begin on financial rules overhaul

Posted on Boston.com.  Click here to view original article.

By Matt Viser
April 29, 2010


WASHINGTON '? Senate Democrats broke through a three-day Republican filibuster last night to open debate on a far-reaching financial regulation overhaul that would dramatically change the nation's financial system in an attempt to prevent a repeat of the 2008 economic crisis.

The vote to move the bill forward came after Democrats threatened to meet through the night '? an attempt to further pressure Republicans and spotlight what some called their stalling tactics '? and after Republicans said they had reached an impasse in private negotiations with Democrats.

'It is now my belief that further negotiations will not produce additional results,'' Senator Richard Shelby, chief negotiator for the Republicans, said in a statement.

The vote, which passed with no objections, also followed 10 hours of congressional testimony Tuesday by executives of Goldman Sachs. The bipartisan grilling highlighted what some consider deceitful practices by several executives in the company before the crisis and fueled calls for tougher regulations.

Both Democrats and Republicans are preparing for a significant fight on the Senate floor.

'It is time for this debate to begin,'' said Senator Chris J. Dodd, the Connecticut Democrat who as chairman of the Senate Banking Committee has led the overhaul effort. 'And it must be a serious, vigorous debate.''

Republicans concurred. 'Now that those bipartisan negotiations have ended, it is my hope that the majority's avowed interest in improving this legislation on the Senate floor is genuine and the partisan gamesmanship is over,'' Senate minority leader Mitch McConnell said in a statement.

Republicans are preparing a variety of amendments, but they would need significant support from Democrats, since each amendment requires 60 votes to pass and there are only 41 GOP senators. Republicans still hold significant leverage: As with opening debate, Democrats need 60 votes to end debate. So if Republicans are united in opposition, they could prolong the discussions or kill the bill.

After Republicans ended the filibuster, Democrats claimed victory.

'The time for reform is now,'' President Obama said on a Midwest tour to promote the legislation.

It was unclear whether Senator Scott Brown of Massachusetts, who has said he would join another Republican filibuster unless certain conditions are met, would support the final legislation. Aides said he still has concerns with several provisions.

Shelby and Dodd had been locked in negotiations for several days. The Alabama Republican yesterday criticized several major components of the bill but added that Dodd had agreed to remove a $50 billion fund '? made up of fees from banks '? that could be used to liquidate failing financial institutions. That provision had been the primary target of GOP opposition, with some Republicans arguing that the fund could have been used to bailout large firms.

Dodd and Shelby were not able to resolve other key differences, including GOP demands to alter proposed regulations on derivatives, a complex financial instrument that helped lead to the financial crisis, and to limit the powers of a consumer protection bureau that seeks to help people avoid trouble with mortgages and credit cards they can't afford.

Also, Republicans have opposed partial implementation of a provision called the Volcker rule, which could restrict the investment options of large institutions, including preventing them from owning private equity funds. Massachusetts life insurance companies are also opposed to that provision. Paul Volcker, former Federal Reserve chairman and economic adviser to Obama, proposed the rule.

The legislation would also establish a council that would be charged with monitoring the system for potential problems.

After a Republican caucus late yesterday afternoon, Brown released a statement: 'I'm pleased that progress has been made to take some steps to ensure taxpayers will not be on the hook for more Wall Street bailouts. We now have a starting point to begin making further improvements to this bill through the amendment process.''

Also yesterday, Mary Schapiro, the Securities and Exchange Commission chairwoman, told senators the timing of the agency's civil fraud charges against Goldman Sachs was not linked to efforts by Democrats to push consideration of the regulations bill. Some Republicans had accused the SEC of timing the April 16 announcement of the charges to bolster Democrats' chances on the legislation.

Earlier yesterday, both sides continued to argue over the pace of the legislation.

Republicans, however, said the threat from Democrats to meet through the night had nothing to do with their decision to move debate to the floor.