Senate begins debate on Wall Street reform

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The Associated Press
Updated 4/30/2010 4:02 AM


WASHINGTON '? Days of high-decibel partisanship yielded to slightly more subdued accusations as the Senate lurched into action Thursday on legislation reining in Wall Street and risky investments that nearly wrecked the economy in 2008.

Within moments of the opening of debate, Sen. Richard Shelby, R-Ala., said he and other Republicans hoped to rewrite the White House-backed bill "so that it actually ends bailouts, protects consumers without jeopardizing our small community banks and brings transparency to the world of derivatives without sacrificing economic growth and job creation."

It was a none-too-subtle accusation that Democrats favor taxpayer bailouts of failing banks, and Sen. Barbara Boxer, D-Calif., volleyed back a few moments later.

"I knew it was false" when Republicans said it, she said. Holding up a mug of water, she added, "It is like saying this glass of water is a cup of coffee. ... And if you say it seven, eight, nine times that it is coffee, someone might believe it."

No votes were taken Thursday. None are likely before Tuesday on the legislation, expected to take two weeks or more to complete.

The House has already passed its version of the bill, and it could be months before a final bill goes to President Obama for his signature.

Despite the rhetoric, Sen. Chris Dodd, D-Conn., said there was a chance for bipartisan agreement on three major issues in dispute: setting rules covering the future failures of large financial institutions, establishing new protections for consumers and regulating risky investments known as derivatives.

While some of the differences are partisan, others are driven by ideological concerns, pressure from banks or other industries, proximity to Wall Street or concerns raised by the Obama administration or the Federal Reserve.

Both the Federal Reserve and the Treasury Department have raised concerns about a provision in the measure that would prohibit banks from participating in the trading of derivatives, the complex investments that some blame for the economy's near-collapse.

Democrats already have agreed to jettison a proposed $50 billion fund financed by banks to liquidate failing financial companies that are too big for bankruptcy.

The administration did not support it, and Republicans claimed it would have perpetuated bailouts.

Without that fund, Republicans fear Democrats might add a bank tax sought by the administration to recoup the cost of past taxpayer-funded bailouts of banks, the auto industry, failed insurance giant AIG as well as mortgage giants Fannie Mae and Freddie Mac.