Democrats were forced to rewrite part of the Wall Street overhaul bill on Tuesday after objections from Republicans threatened to scuttle the legislation.
Sen. Scott Brown’s (R-Mass.) announcement that he would vote against the bill because of a provision imposing up to $19 billion in fees on large financial firms led to lawmakers reconvening a House-Senate conference on the legislation.
The three Republicans had joined all but two Democrats to end debate on the Senate’s version of financial legislation in May. Without the support of Brown, Snowe and Collins, Democrats do not have the 60 votes necessary to clear the conference report through procedural hurdles in the Senate.
Late on Tuesday, the conference committee adopted a new method of paying for the overhaul effort. Instead of the fee on large financial firms, conferees agreed to a Democratic proposal that includes a series of separate changes to make up the shortfall.
The new conference agreement includes language ending the $700 billion financial bailout package from 2008, and using the unspent money to help pay for the Wall Street overhaul effort. The committee said that move would raise roughly $11 billion.
The new report also calls for an increase in the minimum level of the Federal Deposit Insurance Corporation (FDIC) fund. The change from 1.15 percent of total insured deposits to 1.35 percent would yield roughly $6 billion. The change would not affect banks with $10 billion or less in assets.
Another change in the deposit insurance fund would help raise several billion dollars more.
The House may move to vote on the overhaul effort as early as Wednesday. Senate Democratic aides said a vote this week is possible, but Senate Banking Committee Chairman Chris Dodd (D-Conn.) said this was doubtful.
Both Dodd and House Financial Services Chairman Barney Frank (D-Mass.) said they preferred targeting banks with the fees, but that they had little choice given objections from Brown and other centrist Republicans.
“I preferred what we did in the bill,” Frank said. “I preferred asking Goldman Sachs and JP Morgan Chase and John Paulson’s hedge fund and all those other hedge funds above $10 billion, banks and investment houses above $50 billion to be assessed to the tune of about 19 billion.”
Dodd said that the bill might not have been approved with the fees on banks, but that the new arrangement would likely pass muster. He stopped far short of guaranteeing a successful vote, however.
“Obviously this pay-for is something that I have vetted with my colleagues to determine whether or not they’d be for it, but obviously until they cast a vote you never know,” he said.
Most Senate Republicans sharply criticized the new proposal as a series of “budget gimmicks” and “accounting chicanery.”
Sen. Judd Gregg (R-N.H.) said the Democratic proposal undercut the original legislation establishing the $700 billion rescue package, known formally as the Troubled Asset Relief Program (TARP). It called for savings to go to debt relief.
“You’re taking the savings from terminating TARP… and you’re spending it, you’re spending it. You’re not using it to decrease the debt, the deficit,” Gregg said. “If we did this in a private-sector action, we would all be in jail.
This is fraud on the American taxpayer.”
The conference committee action came on the heels of a day of debate over how the cost of the overhaul effort would be paid.
Senate Democrats redoubled efforts Tuesday to build support for the bill after Sen. Robert Byrd’s (D-W.Va.) death left the party another vote short of the 60 necessary.
Sen. Russ Feingold (D-Wis.) said this week he would oppose the bill, as he did in May. Sen. Maria CantwellMaria CantwellReport: GOP lawmakers selling access to top staffers Bipartisan group demands answers on United incident Cohn backs modern version of Glass-Steagall: report MORE (D-Wash.), who also opposed the measure earlier this year, has yet to say how she’ll vote.
With Byrd gone, Democrats need four Republicans to support the legislation, or three if Cantwell switches her position.
Brown had written to the chairmen of the conference committee on Tuesday to say he would oppose the Wall Street overhaul bill as it stands.
In a letter to Frank and Dodd, Brown expressed “strong opposition” to the fees.
“If the final version of the bill contains these higher taxes, I will not support it,” he said.
Collins and Snowe voiced similar concerns.
Brown said Democrats were wrong to add the fees to the report at a time of economic turmoil.
“It is wrong to impose higher taxes and ignore the impact it will have on our economy without considering other ways we might offset the costs of the measure,” Brown said. “I am asking that the conference committee find a way to offset the cost of the bill by cutting unnecessary federal spending. There are hundreds of billions in unspent federal funds sitting around, some authorized years ago for long-dead initiatives. Congress needs to start looking there first, and I stand ready to help.”
— This story was originally posted at 11:47 a.m. and updated at 2:54 p.m., 3:48 p.m., 7:08 p.m. and 8:37 p.m.