By a vote of 59-39 tonight, the Senate passed sweeping legislation to tighten the rules governing the U.S. financial system.
Four Republicans — Sens. Scott Brown (R-MA), Chuck Grassley (R-IA), Susan Collins (R-ME) and Olympia Snowe (R-ME) — joined with all but two Democrats, Sens. Maria Cantwell (D-WA) and Russ Feingold (D-WI), who opposed the bill for not being more aggressive in reforming Wall Street. Sens. Robert Byrd (D-WV) and Arlen Specter (D-PA) didn’t vote.
In the weeks ahead, House and Senate negotiators will meet in a formal conference committee to iron out the differences between this package, and the broadly similar bill the House adopted late last year. The Senate is expected to name their negotiators on Monday.The outcome of the vote was in little doubt, after the Senate agreed by a similar margin to end debate on the legislation earlier this afternoon.
But the policy-making process each evolved in unexpected ways over the last several weeks, and in ways that largely redounded to the benefit of supporters of reform. In a sign of just how important politics can be to the legislative process, the bill has, over the course of the month-long floor fight, become stronger overall. So toxic are the optics of siding with Wall Street, that a number of progressive and popular amendments were adopted, many with bipartisan support. To many observers and experts the Senate’s package is actually superior to the House-passed Wall Street reform legislation–a rare occurrence on Capitol Hill, where, in the era of regular filibusters, legislative strategy is often driven by the need to appease 60 senators.
Another surprise: Weeks ago, conventional wisdom held that the very same politics that helped strengthen the bill would also lead to broad bipartisan support. Though GOP leaders were not so resolutely opposed to this legislation that they forced their caucus to oppose the bill unanimously, in the end very few Republicans actually chose to vote with the Democrats. In a floor speech before final passage, Sen. Richard Shelby (R-AL)–the GOP’s top financial reform negotiator–called the bill “a liberal activist’s dream come true.”
The bill itself calls for new regulations aimed at making the failures that led to the 2008 financial crisis less likely. Though it’s not the final bill President Obama will sign, the reforms would create much greater transparency in the derivatives-trading market, capital requirements for systemically significant financial firms, and a resolution and liquidation mechanism, to wind down those firms when they fail. It would also mandate a broad audit of the Federal Reserve and create a new government agency, tasked with protecting consumers from predatory financial practices and products.
That doesn’t mean all Democrats are pleased with it, or even certain it would prevent future taxpayer funded bailouts. Several senators have openly criticized the bill for not capping the size of big financial firms, and forcibly shrinking those that exceed that limit.
The shape of the final bill is unknown, but House and Senate aides expect that the legislation the President signs will call for several, though not all, of the Senate’s stronger provisions–but will aim not to lose the support of any swing vote senators. Likewise, the White House will push to adopt the Senate’s narrower Fed Audit provision, and to weaken the Senate’s derivatives title, which calls for financial firms to spin off their swaps desks. However, the final derivatives title will likely still be stronger than the House-passed version, which, after an intense, below-the-radar lobbying effort, includes a number of loopholes and carve outs for favored industry players.
That also means that the progressive goal of a stand-alone consumer protection agency will be a heavier lift than the agency called for in the Senate bill, which would be housed inside the Fed.