Banking/Financial Institutions

Congress finalized sweeping financial overhaul legislation on Thursday, handing President Obama a major legislative victory.

Republican Sen. Chuck Grassley (Iowa) pulled his support Wednesday for the financial regulatory reform bill that could come up for a vote sometime Thursday. 

Seen as the possible 61st vote for the conference report, Grassley said he couldn’t vote for the final legislation because of changes made to the bill during conference that cater to Wall Street interests and “waters down” reforms in the Senate bill.

“The conference report guts this reform by replacing it with a mere study,” he said Wednesday in a statement. 

“It’s a bill that most of Wall Street wants passed. And that’s the last thing Iowans expect in any real reform bill.”

Senate Democrats have enough Republican support to get the 60 votes needed to pass the measure and send it to President Obama’s desk. 

The $700 billion bailout has done little to help small banks weather the financial crisis even as big banks repay the money and post record profits, a government watchdog said Wednesday.

The Congressional Oversight Panel over the financial rescue package said that less than 10 percent of small banks that received bailout aid have repaid the money. Nearly $25 billion in bailout money is outstanding with small banks, and roughly 15 percent of the small banks have missed a dividend payment.

Most big banks — including JPMorgan Chase & Co., Wells Fargo, Goldman Sachs and Morgan Stanley — have repaid billions in bailout money and are posting hefty profits.

The government invested capital directly in banks as part of the Troubled Asset Relief Program (TARP), with the first round of money going toward large banks. Seventeen banks with at least $100 billion in assets received 81 percent of the capital; 690 smaller banks received the rest.

"Now small banks continue to struggle and [the Troubled Asset Relief Program] provides little relief," the oversight panel said in a new report.

The report said small banks also may struggle to meet dividend rates that increase from 5 percent to 9 percent in 2013. The increase was intended as an incentive for banks to repay the taxpayer investment.

The report said small banks may become trapped without a way to raise money to repay the higher dividend rate.

"A growing number could default on their obligations to taxpayers, be forced to consolidate or collapse completely," the report said.

Sen. Chris Dodd says a final vote on the 2,300-page financial regulation bill could be held as early as Thursday.

Senate Democrats hope to vote "this week" on final passage for Wall Street reform, Majority Leader Harry Reid (D-Nev.) said Monday.

Reid announced plans to press forward with the financial regulatory reform legislation after key centrist Republicans backed the legislation.

“We will finish our work on this bill this week to ensure that these critical protections and accountability for Wall Street are in place as soon as possible," Reid said in a statement.

The legislation won support on Monday from Massachusetts Sen. Scott Brown (R), and Maine GOP Sens. Olympia Snowe and Susan Collins, putting Democrats within reach of the 60 votes needed to advance the legislation.

Reid saved words of praise for those Republicans on Monday evening.

"Despite the difficult political climate, these Republicans have joined Democrats to support these common-sense protections for consumers, investors and financial institutions that will help prevent another financial crisis," he said.

Senate passage would send the final version of the bill to the White House for President Barack Obama's signature.

Republican Sen. Olympia Snowe (Maine) became the third Republican to back financial regulatory reform legislation, virtually ensuring its passage sometime this week. 

"I intend to support passage of the legislation when it's brought before the Senate for consideration," she said Monday night in a statement. "While not perfect, the legislation takes necessary steps to implement meaningful regulatory reforms, create strong consumer protections and restore confidence in the American financial system."

Shortly after Snowe's announcement, Sen. Majority Leader Harry Reid (D-Nev.) said the Senate would complete work this week on the bill. 

Snowe, a member of the Senate Finance Committee, follows Massachusetts Republican Sen. Scott Brown, who announced his support earlier Monday, in backing the measure. Maine colleague Sen. Susan Collins also backs the bill. 

The death of Sen. Robert Byrd (D-W.Va.) in late June left Senate Democrats several votes short of the 60 needed for passage, with 57 of 58 Democrats voicing support for the measure. 

Massachusetts Republican says bill isn’t perfect, but he expects to support it when it comes to the floor.

An associate of former Rep. Rick Renzi has been convicted on conspiracy and eight of 10 counts of embezzlement.

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One of the four Senate Republicans to help Democrats pass their financial regulatory reform overhaul indicated Friday that he has serious doubts about the final version.

Sen. Chuck Grassley (R-Iowa), through a spokeswoman, told the Wall Street Journal that he has concerns about one of the funding sources for the sweeping legislation:

If Mr. Grassley decides to vote against the bill, Democrats would be left with little margin for error when they bring the bill to the Senate floor, which could happen as soon as next week. Mr. Grassley was one of four Republicans to support an earlier version of the bill when it narrowly passed the Senate in May.

Democrats and White House officials likely need the support of at least two Republicans to secure the 60 votes necessary to block a potential filibuster.

[snip]

Mr. Grassley’s spokeswoman, Jill Kozeny, said he is “very concerned about the precedent of using the FDIC fees both as a credit to the FDIC and to count as [a way to pay for the bill], and it’s his view that TARP money ought to be used to pay down the debt and not for more spending.”

Ms. Kozeny didn’t say whether Mr. Grassley had made up his mind on how to vote.

The Senate is expected to make its final vote on the conference report next week, which would send the legislation to President Barack Obama’s desk. The financial reform effort is one of the White House’s top legislative priorities. 

With the death of Sen. Robert Byrd (D-W.Va.) and the appointment of his replacement up in the air, the Senate vote on the Wall Street bill has become uncertain. 

The House passed the conference report just before Congress broke for the July 4 recess last week after the conference was reopened to alter a $19 billion bank tax that key Republicans, such as Susan Collins (Maine) and Scott Brown (Mass.), said could prevent them from voting for the bill.

Collins had said she is now leaning toward supporting the bill, and Brown said that he is taking the recess period to study the final language. 

Cross-posted from Blog Briefing Room. 

Republicans have criticized the bank's political connections and charged the Obama administration with intervening on its behalf.