Financial overhaul bill gets bipartisan push in Senate
Thursday, May 6, 2010
In a rare show of bipartisanship, the Senate on Wednesday overwhelmingly approved an amendment to the financial regulatory bill aimed at ensuring that taxpayers never again be on the hook for bailing out collapsed banks and investment firms.
The 93 to 5 vote brought together senators as diverse as ultra-liberal Bernard Sanders (I-Vt.) and Richard C. Shelby (R-Ala.), the conservative who co-wrote the amendment with Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee.
The vote came as Democrats on Wednesday also sought to undercut key GOP objections to the bill, a strategy aimed at securing much-needed Republican support for the sweeping legislation in the days ahead.
Lawmakers began voting on proposed amendments to the 1,400-page bill a week after the Senate opened formal debate on the legislation. The first two amendments Democrats allowed to reach the Senate floor had an unambiguous purpose: To put an end to GOP attacks that the far-reaching bill would perpetuate taxpayer-funded bailouts.
Sen. Barbara Boxer (D-Calif.) secured nearly unanimous support for her three-paragraph amendment clarifying that taxpayers would not bear any losses from the liquidation of bankrupt firms, a goal widely shared by both parties and reflected in a 96 to 1 vote.
Perhaps more significant was the Dodd-Shelby amendment that followed.
Their deal -- hammered out late Tuesday night and into Wednesday -- centered on a portion of the bill aimed at giving the government power to wind down large, troubled firms without putting taxpayer money at risk. The heart of the agreement was Dodd's willingness to drop a proposed $50 billion fund, which would be filled upfront by the financial industry, that would cover the cost of closing down failing firms.
Republicans had criticized the provision as a "bailout fund" that could encourage financial firms to act recklessly, knowing the fund was in place. Dodd said Wednesday that neither he nor the Obama administration had proposed the fund. It was a GOP suggestion, he said.
Under the Dodd-Shelby deal, the Federal Deposit Insurance Corp. would liquidate faltering firms by borrowing money from Treasury to cover initial costs. The government would recover the costs by selling off the firm's assets, with creditors and shareholders incurring losses. Other large banks could be assessed to pay for additional costs as a last resort.
Also, creditors of a failing firm would be forced to pay back the government any money they received above what they would have gotten under a bankruptcy proceeding. Any seizure of a large, failing firm would require court approval to ensure that the government not shut down a company inappropriately. In addition, Congress would have to approve the use of federal debt guarantees, and regulators also would be able to ban management and directors of failed firms from working in the financial sector for a minimum of two years.
'A good first step'
Both parties praised the deal Wednesday, though from different perspectives.
Minority Leader Mitch McConnell (R-Ky.) said in a statement that "while some said the Dodd bill did not allow for bailouts, this bipartisan agreement improves the bill by limiting loopholes and seeks to make sure investors, not taxpayers, are on the hook when a Wall Street bank fails." He called it "a good first step."