Populism challenged in Wall Street reform bill

The Senate is moving to dampen the loudest populist cries in the Wall Street overhaul.

In quick succession on Thursday, senators softened an amendment requiring new audits of the Federal Reserve and then voted down an amendment to cap the size of the nation's biggest banks.

The populist outrage at Wall Street banks and the federal regulators that bailed them out appears to be reaching its limit. Plenty of other amendments fiercely opposed by Wall Street could still pass, and the underlying bill aims directly at the biggest financial institutions.

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But the two amendments on Thursday had received huge populist and grassroots support.

Sen. Bernie Sanders (I-Vt.), the principle backer of the Fed audit amendment, agreed to alter his legislation to require audits of the bank's activities during the financial crisis. An earlier version of the amendment met stiff opposition from the White House and Federal Reserve, which argued the legislation would compromise the independence of U.S. monetary policy. The amendment had drawn strong support from conservative Republicans and liberal Democrats.

Sanders said the new legislation would still force the Fed to disclose its many steps to bail out banks. Sanders said on the Senate floor that preserving the independence of the Fed was important to him.

Rep. Ron Paul (R-Texas), the libertarian critic of the Fed, said Thursday on his Facebook page that Sanders "sold out" on the amendment. The liberal Firedoglake blog chastised Sanders as well.

But the Treasury Department and Senate Banking Committee Chairman Chris Dodd (D-Conn.) quickly lent support to the new amendment from Sanders.

The Senate held off on final voting on the Sanders amendment. But later on Thursday, the Senate shot down a high-profile effort to impose additional restrictions on big banks.

Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.) proposed legislation that would have limited the size of big banks. They and other supporters argued that clear caps on the size of banks are necessary to fully rein in Wall Street's excesses.

The amendment drew strong backing from consumer advocacy groups.

But the Senate voted it down on a 33-61 vote. The amendment split Democrats, with 27 opposing the measure. Sen. Joe Lieberman (I-Conn.) also opposed the measure.

Sens. Tom Coburn (Okla.), John Ensign (Nev.) and Richard Shelby (Ala.) were the three Republicans to support the amendment.