Tuesday, May 18, 2010

Financial Regulation hits the ropes (NYT)


Senate Republicans Call Reform Bill a ‘Takeover’ of the Banking Industry

WASHINGTON — Senate Republican leaders on Tuesday unleashed a barrage of criticism at the far-reaching financial regulatory legislation being debated on the Senate floor, indicating that many of the party’s leaders were prepared to vote against the bill.

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Republicans accused Senate Democrats and the Obama White House of orchestrating a “government takeover” of the financial industry and suggested that the bill would severely harm businesses on Main Street.
A procedural vote to wrap up debate is set for Wednesday, and despite the sharp Republican rhetoric, the legislation is expected to be approved. It would then need to be reconciled with a version approved by the House in December.
Senator Christopher J. Dodd, Democrat of Connecticut and the main sponsor of the regulatory bill, put forward an amendment hoping to broker a compromise over a controversial provision that would force the biggest Wall Street banks to spin off their lucrative derivatives business.
Under Mr. Dodd’s proposal the new restrictions on derivatives trading would be delayed for two years until after they have been studied by a council of federal regulators. The council would probably kill the provision, and Senator Blanche Lincoln, Democrat of Arkansas, the author of the rules, said that she would fight efforts to weaken them.
Mrs. Lincoln, who was home in Arkansas on Tuesday battling for her career in a tough primary race, issued a statement saying she would not back down.
“I’m proud of the support my provision has received both inside and outside the Senate and will defend it should there be a debate on the Senate floor,” Mrs. Lincoln said.
The remarks by Republican leaders on Tuesday suggested they saw no benefit in joining with the Democrats even to impose tougher rules on Wall Street. At a news conference, the Senate Republican leader, Mitch McConnell of Kentucky, blamed the White House.
“The marching orders are coming from downtown: push the bill as far to the political left as possible,” he said. “Look at the last 15 months. They’re running banks, insurance companies, car companies, taking over the student loan business, taking over health care, now, apparently doing to the financial services industry what they did to the health care industry.”
“This is a massive government overreach,” Mr. McConnell said, adding that Republicans were confident about their political prospects. “The American people are saying, ‘enough’ and I think that’s why everyone is anticipating a major midcourse correction this November.”
The majority leader, Harry Reid of Nevada, countered by accusing Republicans of doing the bidding of big banks.
“We have a strong bill to crack down on Wall Street gamblers, end too big to fail and protect consumers,” Mr. Reid said. “Republicans have made it clear that they have no interest in accountability or fairness.”
Mr. Reid said the Republicans had tried “time and time again, to weaken these Wall Street reforms, and shield those big banker friends that they have. The Senate rejected those efforts.”
But given the deep public anger over the 2008 financial collapse, at least a handful of Republicans who are up for re-election are expected to support the legislation. And some Republican aides said party leaders might still support the bill, if they win additional concessions before a final vote, perhaps Thursday.
With the race on to complete the bill, lawmakers battled furiously to get votes on their amendments.
Senator Byron L. Dorgan, Democrat of North Dakota, clashed with his fellow Democrats to get a vote on an amendment to outlaw so-called naked credit default swaps, by which investors buy insurance on bonds they do not own.
Mr. Dorgan, who is retiring after this year, criticized lawmakers in both parties for trying to block a vote on his plan, which he said would curb risky behavior by financial companies. “It’s a purely speculative gamble,” Mr. Dorgan said. “There’s not one social or economic benefit.”
He added, “There’s about $10.9 trillion in credit default swaps held by commercial banks. Those are institutions, by the way, whose deposits are insured by us, by the American taxpayer.” His amendment was defeated, 57 to 38.
In other floor action, the Senate, by a vote of 80 to 18, approved an amendment that would ease proposed restrictions on the federal government’s ability to prevent states from adopting and enforcing their own, tougher standards on federally-regulated banks.
The amendment, sponsored by Senator Thomas R. Carper, Democrat of Delaware, relaxed some of the proposed restrictions on the Office of the Comptroller of the Currency’s ability to override state banking laws. The overall intent of the broader bill, however, is to make it tougher for the federal government to do so.
While approving the measure, the Senate rejected, by a vote of 55 to 43, a more sweeping proposal by Senator Bob Corker, Republican of Tennessee, that would have restricted state attorneys general from enforcing rules to be issued by a new federal consumer financial protection bureau.
With primary elections being held in several states on Tuesday, Republican Senate leaders seemed intent to portray Democrats as growing the federal government.
“Increasingly, the majority seems to be doing what they did on health care now to Main Street,” said Senator Lamar Alexander of Tennessee, the No. 3 Republican. “It looks like another Washington takeover.”
Sewell Chan contributed reporting.

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