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Senate passes financial regulation bill
Consumer advocates who pressed for tough regulations said that the bill falls short in places but that they are delighted it passed.
"No bill that deals with big issues is ever perfect, but the Senate's Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees," Elizabeth Warren, head of the Congressional Oversight Panel and an advocate of the new consumer watchdog, said in a statement.
But financial and business groups called the bill flawed.
"If you want to drive capital out of the United States, this is your bill," Thomas J. Donohue, president of the U.S. Chamber of Commerce, said in a statement. "Today we have taken a significant step in the wrong direction, and it will put American companies and our financial system at a competitive disadvantage to the detriment of our long-term economic growth."
Dodd's bill, like the one Frank guided through the House, largely mirrors the blueprint the administration laid out last year. But it didn't always.
Dodd's initial draft, introduced in November, differed in significant ways from Frank's legislation and the administration's original vision. But after administration officials, industry lobbyists and fellow lawmakers attacked portions of Dodd's proposal, he spent months crafting a more modest draft and trying to win Republican support. Eventually, the bill sailed through the banking committee on a party-line vote, and was sent to the Senate floor virtually untouched.
Republicans filibustered the bill at the outset, refusing to allow debate to begin. But they quickly switched course, and lawmakers considered dozens of amendments during three weeks of unusually civil debate.
Despite conventional wisdom that the bill would get watered down as it moved through the Senate, the opposite happened.
For instance, Sen. Blanche Lincoln (D-Ark.), chairman of the Senate agriculture committee, proposed dramatic restrictions on trading in derivatives, including a provision that could force big banks to spin off the lucrative business altogether. Her language was added to Dodd's bill and endured, despite efforts by the administration, lobbyists and Dodd himself to temper it.
In the meantime, other senators added tough amendments that, for example, would place new restrictions on credit rating agencies, force big banks to meet higher capital requirements and limit the fees that merchants have to pay banks when a customer uses a credit or debit card.
In the final hours, a pair of issues remained unresolved. One was a Republican proposal that would exempt from new oversight auto dealers providing loans. The other, a Democratic proposal, would ban banks from making speculative investments using their own capital and from owning hedge funds or private-equity funds. Ultimately, neither came up for a vote, but the auto dealer provision could still be addressed in the House-Senate negotiations.
Even with the legislation's passage assured, Republicans continued to take shots at it. They have argued that it would not prevent future government bailouts, that the new rules would harm small businesses and that the overall effort would result in unnecessary red tape.
"In the end, we will be judged by whether we have created a more stable, durable and competitive financial system," said Sen. Richard C. Shelby (Ala.), the ranking Republican on the banking committee. "That judgment will not be rendered by self-congratulatory press releases but, rather, by the marketplace. And the marketplace . . . does not give credit for good intentions."
Other issues remained unresolved heading into the conference process, such as Lincoln's derivatives provision. Frank said he expects to abandon a House provision that would require the financial industry to pay into a fund that could be used to liquidate failing firms, an issue that became a political lightning rod in the Senate. And he said he expects the Senate to back off its proposal to house an independent consumer protection agency within the Federal Reserve.
For Dodd, who this year announced his retirement after nearly three decades in the Senate, the bill's success marked a personal triumph.
"I wanted to demonstrate that the Senate of the United States could also conduct its business much as our founders intended," said Dodd, who was surrounded by his wife and two young daughters and receiving congratulations from colleagues. "And that is to have that full-throated, engaging, vibrant debate on a critical issue in front of our country. . . . And we did that."
Staff writers Lori Montgomery, Shailagh Murray, David Cho, Neil Irwin, Jia Lynn Yang, Renae Merle and Zachary A. Goldfarb contributed to this report.