WASHINGTON – The Senate Thursday approved the most sweeping rewrite of financial rules since the Great Depression, a milestone in President Barack Obama’s drive to expand government oversight and safeguard against another crisis like the Wall Street meltdown of 2008.
The 59-39 vote was mostly along party lines: Four Republicans joined all but two Democrats in supporting the legislation.
Obama applauded as the Senate neared the end of its three-week debate on a top administration priority.
“Our goal is not to punish the banks but to protect the larger economy and the American people from the kind of upheavals that we’ve seen in the past few years,” Obama said. “And today’s action was a major step forward in achieving that goal.”
An exultant Senate Majority Leader Harry Reid, D-Nev., was less diplomatic.
“When this bill becomes law, the joyride on Wall Street will come to a screeching halt,” Reid said.
Most Republicans opposed the legislation because they believed it went too far in expanding government oversight of the economy and not far enough in ending the possibility of future government bailouts.
“In my opinion, it’s an overreach,” said Sen. Bob Corker, R-Tenn., one of a handful of Republicans who spent weeks working with Democrats to craft a bipartisan compromise, only to vote against it in the end. “We could have made it better. We didn’t.”
The legislation would establish a new bureau within the Federal Reserve to protect consumers in the financial marketplace; impose tough regulations on complex financial derivatives; grant shareholders a nonbinding vote on executive compensation; and give the government authority to seize and dismantle teetering firms whose failure would pose a danger to the economy.
The House in December passed its version of the bill, which is in some respects more industry-friendly than the Senate’s – a reflection, in part, of the intensification of anti-Wall Street sentiment in the last six months. Those differences will have to be resolved in House-Senate negotiations Democrats hope to wrap up in a matter of weeks.
House Financial Services Chairman Barney Frank, D-Mass., predicted the final bill will be written, passed and sent to Obama to sign by the Fourth of July.
“There’s a need for speed,” Frank said in a CNBC interview.
Still, the final negotiations will likely inspire fierce lobbying by financial, business and consumer interests. The Senate, for example, skirted a vote on an amendment that had been included in the House bill to exempt car dealers from the new consumer protection agency.
Car dealers are still pressing for senators to back a nonbinding motion supporting their cause, which is expected to come to a vote Monday.
The legislation cleared the last major hurdle earlier in the day, when the Senate voted 60-40 to cut off debate. Three Republicans – Scott Brown of Massachusetts and Maine’s Olympia Snowe and Susan Collins – joined Democrats to vote to end the filibuster.
Sens. Russell Feingold of Wisconsin and Maria Cantwell of Washington were the only Democrats to oppose ending debate because they wanted more time to consider amendments that would toughen the bill’s new regulation, including a push to restore a prohibition on commercial banks doing investment banking.
In the vote on final passage, one other Republican – Sen. Charles Grassley of Iowa – joined the majority. Two Democratic senators – Robert C. Byrd of West Virginia and Arlen Specter of Pennsylvania – were absent. Although it took 60 votes to break the filibuster, only 51 were needed to pass the bill.
Senate GOP Leader Mitch McConnell, R-Ky., and other Republicans were especially critical of the bill’s new consumer bureau, which they said was an unnecessary expansion of government power that will impose onerous new regulations on small businesses that had no role in the financial crisis.
“It uses this crisis as yet another opportunity to expand the cost and size and reach of government,” McConnell said. “It punishes Main Street for the sins of Wall Street.”
And Republicans were particularly upset the bill does not address the futures of mortgage financing giants Fannie Mae and Freddie Mac, which were seized by regulators in 2008 and have received a total of $126 billion in bailouts so far.