Bipartisan votes on Wall St. reform bill make easy Senate passage likely

Bipartisan votes on

By Jon H. Harsch

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Washington, May 6 – In the Senate debate on financial reform legislation, Senate Banking Committee Ranking Member Richard Shelby (R-AL) charged Thursday that “the Dodd bill would create a bigger bureaucracy. . . a massive new bureaucracy . . . an out-of-control consumer bureaucracy . . . this is the nanny state at its worst.”  Shelby acknowledged that financial reform is needed but said Republicans are offering an alternative approach to make the changes “in a more prudent manner.”

Despite such charges, however, the Senate has delivered solid bipartisan votes in favor of improving the Democrats’ bill. Voting began Wednesday with near unanimous votes which clarified that the financial community itself will pay for any future financial sector bankruptcies, not taxpayers, and which eliminated the bill’s proposed $50-billion industry-paid fund to close down bankrupt firms.

Thursday began with a unanimous 98-0 vote in favor of a bipartisan amendment offered by Sens. Jon Tester (D-MT)  and Kay Bailey Hutchison (R-TX) to make larger, riskier banks pay larger Federal Deposit Insurance Corporation fees than smaller banks. Tester said “This amendment will make sure rural community banks pay only their fair share when it comes to federal bank insurance. It’s good news for the small banks that make rural America run. And for the people, small businesses, and farmers and ranchers that depend on those banks.”

One of the amendment’s 15 co-sponsors, Sen. Tom Harkin (D-IA), said that the amendment “will help ensure that Iowa’s community banks can compete on a level playing field with the largest banks who engage in the most hazardous behavior.  It also provides community banks with additional capital they can loan to Iowa’s communities, which will give our local economies a boost.” He pointed out that under current rules, despite their lower risk profile, “community banks that serve

With more than 100 amendments up for debate, Sens. Saxby Chambliss (R-GA), Judd Gregg (R-NH), and Bob Corker (R-TN) filed an amendment Thursday to eliminate the Senate Agriculture Committee-passed provision which would prohibit federal assistance to swap entities. The amendment would remove authority to prohibit banks from engaging in derivatives transactions.

In support of his amendment, Sen. Gregg said “The derivatives market in this country is a critical source of liquidity and credit that helps make the economic engine of this country run. Unfortunately, the provision included in Chairman Dodd’s bill will do fundamental harm to our nation’s derivatives market, pushing jobs and capital overseas. Non-partisan experts, including FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan, and staff at the Federal Reserve have warned of the devastating effects that this provision would have on our economy. The current provision is unnecessarily punitive and will not help bring transparency and accountability to the derivatives marketplace. In fact, it could have the opposite effect. For this reason, Senators Chambliss, Corker and I are offering an amendment to strike the provision in full. I hope my colleagues on both sides of the aisle will join us in supporting this amendment so that we can keep America as the preeminent destination for global capital, allow

Sen. Chambliss, Ranking Member of the Senate Agriculture Committee, said that “Our amendment simply strikes a provision that creates obstacles for those who use swaps to manage their business risks and as such need access to well capitalized counterparties. This is just another example of how many provisions in the underlying bill overreach and cause unintended hardships on businesses that had nothing to do with the collapse of the financial markets.”

Sen. Corker explained that “We need a strong derivatives title that causes more trades to be cleared and increases transparency. Instead, the current bill would remove swap desks from commercial banks, lowering the amount of capital available for actual lending. That is exactly the wrong thing to be doing in this tough economy.”

As debate continued Thursday, Sen. Kit Bond (R-MO) echoed other Republicans when he charged that the current Dodd bill “will undoubtedly hurt ordinary Americans.” But Bond also pointed out that he’s working closely with Senate Banking Committee Chair Chris Dodd (D-CT) on writing amendments to improve the bill – one more sign along with the bipartisan votes, that despite sharply partisan rhetoric, the Senate is expected to pass a tough financial reform bill next week with overwhelming bipartisan support.

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