Senate Republicans abandoned their efforts to block debate over legislation overhauling U.S. financial rules, vowing instead to fight for changes to the bill on issues ranging from consumer protection to derivatives.
The Senate today will begin considering amendments to the legislation, which is based on a proposal by President Barack Obama, including the Democrats’ plan to strengthen oversight of the $605 trillion over-the-counter derivatives market.
“I will be offering a lot of amendments” on parts of the bill, including a proposal to create a consumer financial protection bureau at the Federal Reserve, said Alabama Senator Richard Shelby, who negotiated on behalf of Republicans to get a bipartisan deal before talks broke off yesterday.
Republicans and Democrats yesterday ended a two-week standoff on the bill, bringing Congress closer to approving the biggest financial-oversight restructuring since the 1930s, two years after a mortgage meltdown shook global markets and hobbled Lehman Brothers Holdings Inc. and other Wall Street firms.
The move came a day after Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and other company executives underwent more than 10 hours of questioning by a congressional panel looking at Wall Street’s role in the financial crisis.
“Senate Republicans have finally agreed to let us begin this debate,” Majority Leader Harry Reid, a Nevada Democrat, said in a statement. “Obstruction has wasted enough of the American people’s time, and now it’s time to get to work.”
The lawmakers agreed by unanimous consent to move forward with the legislation after Republicans said they got assurances that Democrats would change the most contentious piece of the bill aimed at preventing taxpayer-funded bailouts of big banks.
On three previous votes this week, the chamber’s 41 Republicans united to block consideration of the bill, offered by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat. Democrats had also threatened an all-night session with additional votes to dramatize the Republican opposition to starting debate.
In a meeting with Dodd yesterday, Shelby got assurances that Democrats would remove from the bill a $50 billion industry-supported fund that would be used to wind down failing firms, according to an aide to the Republican lawmaker. He was also told taxpayers wouldn’t be exposed; that failing firms would be liquidated and shareholders wiped out; and that Congress would have a say in any guarantee program, the aide said.
“The bill is in better shape than it was when it came out of committee,” Senate Republican Leader Mitch McConnell, a Kentucky Republican, told reporters yesterday.
Reid’s spokesman, Jim Manley, said it was “not true” that Dodd assured Republicans of specific changes to the legislation. “All this is going to be dealt with on the floor,” Manley said. “We are going to have an open amendment process” that will allow Republicans try to change the legislation.
Today’s opening debate will address a derivatives measure that Senate Democrats agreed to this week, involving a provision offered by Senator Blanche Lincoln, an Arkansas Democrat, to require commercial banks to wall off their swaps- trading desks.
Senator Bob Corker, a Tennessee Republican and member of the banking committee, said he wanted to eliminate that clause.
“What is the point of doing that?” he told reporters yesterday. “All it does is lower the amount of capital available in America for actual lending.”
Lincoln’s provision is “toast” because it “will be altered tremendously before a bill is passed,” Corker said.
Republicans also may offer amendments to ease a measure requiring regulators to ban proprietary trading at U.S. banks; eliminate language removing the Fed’s authority to oversee banks with less than $50 billion in assets; and preserve the power of federal regulators to override states in applying consumer-protection rules at national banks.
The legislation, if passed in the Senate, would need to be merged with a version the House approved in December. The two measures differ over issues including the power of the Federal Reserve, consumer protection and derivatives regulation.
Democrats held votes every day this week to begin debate, ratcheting up pressure on Republicans by portraying them as supporting Wall Street over the millions of Americans who lost jobs in the aftermath of the economic crisis.
Looking for Leverage
Republicans said they were holding firm to gain leverage in the negotiations to amend the bill and protect taxpayers.
That ended after Shelby and Dodd agreed to halt their talks. After yesterday’s meeting, Shelby declared the discussions had reached an “impasse” and McConnell issued a statement signaling a willingness to begin the floor debate.
“We haven’t been able to move at all on the consumer agency,” Shelby said, adding his “understanding” is that Dodd would remove the $50 billion fund from the bill.
Obama, who offered the proposal last June that formed the basis of the bill, said yesterday the Senate bill may cut Wall Street bonuses while shoring up the financial industry.
“We’ll end up having a safer, more secure financial system,” Obama told reporters on his plane returning to Washington from two days of speeches in the Midwest. “Banks and other financial institutions can get back to making money the old-fashioned way by lending it to companies to build business and create jobs.”
Polls show public support for tougher regulations on Wall Street. About two-thirds of Americans back tighter rules for banks and other financial institutions, according to an April 22-25 Washington Post/ABC News poll.