WASHINGTON (CN) – The Senate continued its debate on the financial reform bill Friday, ending a week of voting on amendments designed to overhaul the nation’s financial system. On Thursday, the Senate voted 61-38 to defeat a Republican measure that would have given the Federal Deposit Insurance Corporation oversight of a proposed consumer protection agency.
Democrats favored the creation of an independent consumer protection agency, a major facet of President Obama’s plan for financial reform.
Obama said Thursday that the amendment would “gut consumer protections and is worse than the status quo,” and added that it would “significantly weaken consumer protection oversight.”
Sen. Jack Reed, D-RI, said the measure, proposed by Sen. Richard Shelby, R-Ala., should be retitled “buyer beware,” because it did not aid in the bill’s objective of protecting consumers. “It’s not like a watchdog. It’s like a lapdog — bureaucracy but no bite,” Reed said in a floor speech Thursday.
Republican Senators Olympia Snowe of Maine and Charles Grassley of Iowa joined Democrats in voting against the proposal.
On Wednesday, Senators voted overwhelmingly, 96-1, in favor of an amendment proposed by Sen. Barbara Boxer, D-Calif., banning the use of taxpayer funds to bail out large banks. Under the amendment, if federal regulators seize a firm, the firm would be wound down and its assets sold rather than fueled with taxpayer money. The amendment promised the end of taxpayer bailouts, a major driving point of the bill.
The government poured $700 billion in taxpayer funds to keep financial firms afloat after the market collapse in fall 2008.
Sen. Jon Kyl, R-Ariz., was the lone senator to vote against the measure.
“We’ve ended the too-big-to-fail debate,” Senate Banking Committee Chair Chris Dodd, D-Conn., said after completion of the vote, using the phrase describing firms that are so large and interconnected that they bring down the economy with them if they fail. Dodd is the primary sponsor of the Wall Street reform bill.
The Senate also voted 93-5 Wednesday in favor of the so-called Shelby-Dodd amendment, which could liquidate failing firms by first taking money from the Treasury and then selling off the bank’s assets to repay the funds. Any difference would be made up in fees imposed on banks.
The Shelby-Dodd amendment eliminated the idea of a $50 billion fund that big banks would prepay into in case they failed. Republicans argued that the “honeypot” fund guaranteed future taxpayer bailouts. Democrats rejected this reasoning, but decided to drop the fund anyway.
“I have no objection to dropping that provision,” Dodd said in a statement released Wednesday after negotiations with Dodd Tuesday night.
Dodd said the measure ensures that “when large firms fail, they fail. The management is fired, creditors and shareholders take losses, the company is liquidated and taxpayers aren’t on the hook.”
The 1,400-page bill, entitled Restoring American Financial Stability Act of 2010, aims to add consumer protections, ramp up regulations for the derivatives market, and bring overall reform to Wall Street.
There are expected to be close to 100 amendments proposed for the bill.
Senate Majority Leader Harry Reid, D-Nev., expressed frustration about the lengthy debate period. “I can’t spend 24 hours on one amendment and accommodate people here,” he said in a floor speech.
Reid initially pressured Senate Republicans to bring the bill to the floor by holding three votes in three consecutive days early last week. Republicans had hoped to draw out negotiations on the bill behind closed doors before it went to the floor for official debate.
No further votes are expected until next week.