Wall Street reform bill advances, debate to begin on Thursday

Senate Republicans on Wednesday said they had reached a key agreement with Democrats, paving the way for debate to begin on a sweeping Wall Street reform bill.

The accord came after Democrats had stepped up their hardball tactics with Republicans in recent days.

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GOP senators claimed they were not caving to political pressure, but had won an important victory by reducing the likelihood of future taxpayer-funded bailouts.

Senate Majority Leader Harry Reid (D-Nev.) forced Republicans to vote three times over the course of three days to block the bill. During that span, Democrats hammered Republicans as the servants of big banks.

At press time, the Senate agreed by unanimous consent to proceed to debate on the legislation.

On Wednesday, Reid stepped up the pressure by threatening to hold an all-night session of the Senate to draw more public attention to GOP efforts to block floor debate.

In a floor speech, Reid said, “The negotiations we hear so much about are never going to end. It’s ‘As the World Turns,’ the soap opera that never ends.”

Working with Reid, President Barack Obama has used the bully pulpit to criticize Republicans and strongly hail the Senate measure. The president said he was “very pleased” to hear of the news that Republicans will stop blocking debate on the legislation.

The Democratic tactics appeared to have had an effect even before Senate Minority Leader Mitch McConnell’s (R-Ky.) announcement as Republican centrists softened their opposition and signaled they would allow the bill to proceed.

McConnell touted the gains his conference made by blocking debate on the Democratic bill for several days.

The delaying action also gave Republicans more time to study the legislation and to assemble a broad array of business interests with concerns over the legislation, setting the stage for an intense debate.

McConnell said that Senate Banking Committee Chairman Chris Dodd (D-Conn.) made an important concession to Republicans by agreeing to close “loopholes” that Republicans say would have let federal officials draw on taxpayer funds to wind down troubled banks.

“The time afforded by my Republican colleagues and Sen. Ben Nelson [D-Neb.] was instrumental in gaining assurances from the chairman that changes will be made to end taxpayer bailouts and the dangerous notion that certain financial institutions are too big to fail,” McConnell said.

Nelson voted with Republicans three times to stall debate on the bill.

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The concession by Dodd to limit the federal government’s ability to draw on public funds to liquidate large institutions is one Democratic leaders said last week that they were open to.

At press time, GOP staffers said the $50 billion fund had been stripped from the bill, but a senior Democratic aide strongly disputed that assertion.

For weeks, Republicans argued forcefully the fund would create a “moral hazard” and embolden banks to engage in risky trades by providing assurance of government intervention to save bad deals.

The fact that Dodd declined to jettison the fund shows that he and Reid clearly believed they had the upper hand in the political debate.

Dodd said Wednesday that he could not give more ground to Banking Committee ranking member Richard Shelby (R-Ala.) in private talks and said the 1,400-plus-page measure should come to the floor for senators to debate and change through amendments.

“They have been productive talks, but I cannot agree to his desire to weaken consumer protections, given the enormous abuses we have seen,” Dodd said in a Wednesday afternoon statement. “It is time for this debate to begin. And it must be a serious, vigorous debate. It is time for the Senate to operate as the Senate should.”

Senate Republican centrists began to soften their stance against the bill Tuesday.

Retiring Sen. George Voinovich (R-Ohio) told reporters that he planned eventually to vote to begin debate on the Senate bill, undercutting somewhat Shelby’s ability to prolong talks for several weeks, as some Republicans wanted.

On Wednesday morning, Sens. Bob Corker (R-Tenn.) and Susan Collins (R-Maine) also signaled they were getting ready to allow the Wall Street reform debate to begin.

Corker said in a CNBC television interview Wednesday morning that “there’s no question the bill will come to the floor.”


Collins, another important swing vote, said on MSNBC that if Dodd and Shelby failed to reach a broad agreement, “we should proceed” with floor consideration of a bill.

Democrats had accused Republicans of trying to negotiate the bill in the dark, behind closed doors, instead of publicly on the Senate floor, flipping an argument the GOP used effectively during the healthcare debate.

Shelby said negotiations hit an impasse and cited his concerns over a new consumer financial protection office Democrats designed to crack down on predatory lending.

“This bill still contains a sprawling new consumer protection bureau that will find and force its way into facets of our economy that had nothing to do with the housing crisis,” he said.

Republicans say the bill is so broadly drafted that auto dealers and other businesses could become ensnared in new federal regulations.

But Dodd emphatically disputed that concern in a press conference.

“If they’re a finance company, if their principal business is in financial finances and products, [they] are covered by this bill,” Dodd said. “If you’re just a business that has a loan process … you’re not covered by the consumer financial protection [bureau].”

GOP opposition to the Wall Street reform debate began to look more politically risky after Democrats released internal e-mails from Goldman Sachs suggesting the prominent bank had sold clients assets it knew to be toxic.

On Tuesday, Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, grilled Fabrice Tourre, a Goldman executive named by the Securities and Exchange Commission in a fraud suit.


Silla Brush contributed to this article.