The house representatives has already approved final

July 12th, 2010|Editor
Law

The House of Representatives has already approved a final version of the bill, which imposes a range of tough new restrictions on the industry in an effort to avoid a repeat of the 2007-2009 financial crisis. After a year and a half of work, Democrats are eager to send it to President Barack Obama to sign into law.

Passage of the bill would give them a second major legislative achievement, alongside healthcare reform, to show voters as they try to retain control of Congress in elections this November.

In the Senate, Reid can count on 57 Democratic votes for the measure, which would create new consumer protections and saddle financial firms with tough new restrictions.

Republicans Susan Collins and Scott Brown have indicated that they are inclined to support it as well.

But that still leaves Reid one vote short. Republicans Olympia Snowe and Charles Grassley have backed the bill earlier in the legislative process, but neither has said whether they will support the final version.

Reid could pick up another Democratic vote if West Virginia Governor Joe Manchin promptly appoints a successor to fill the seat of the late Senator Robert Byrd.

While Manchin is expected to name a Democrat who supports the Wall Street reform bill, it is unclear if he will name a successor in time for a vote this week, in which case Democrats may have delay action.

Analysts, however, expect Reid will ultimately get the votes he needs to send the measure to Obama, as moderate Republicans will be hard-pressed to justify a no vote after winning a wide range of key concessions.

I think everyones pretty comfortable that they have the numbers, said Jodi Lashin, a lawyer at Pryor Cashman who has been tracking the bill closely.

Alan Lancz, president of Alan B. Lancz amp Associates in New York, said a failure to move the bill to a final vote would add another layer to the concerns of investors.

If it doesnt pass, there will be a slight positive, but there will be worry as to whether it will come back in a worse form down the road, Lancz said. If its just delayed, it might actually worry investors more as to what else is being planned or added to the bill.

Since hitting a 2010 high in April, the KBW Banks Index has fallen nearly 15 percent as concern grew on how the legislation would crimp industry profits.

COULD HAVE BEEN TOUGHER

With a nervous eye on the coming elections, Democrats hammering out the sweeping bill rode a wave of public disgust against Wall Street, perhaps the only address in America less popular with voters than Capitol Hill.

Despite the best efforts of industry lobbyists, the legislation actually got tougher over the past year as it moved through the chambers of Congress.

Financial firms will face a range of new restrictions, from increased scrutiny of consumer loans to limits on their trading activities.

But the industry managed to soften the impact of many of the bills harshest provisions during a final all-night negotiating session.

Banks would be barred from trading for their own profits under a provision named after former Federal Reserve Chairman Paul Volcker. But lawmakers softened the Volcker Rule to allow banks to maintain small investments in hedge funds and private-equity funds, and gave them further leeway by opting to loosen the way they measure those stakes.

Though consumer loans will come under new scrutiny from a consumer-protection authority, auto dealersamong the largest players in this area — won a hard-fought exemption.

And while Wall Street banks will have to spin off much of their lucrative swaps-dealing activity into separately capitalized affiliates, lawmakers at the last minute allowed banks to keep many types of swaps in-house.

Even when Obama signs the bill into law, its ultimate impact will not be known until regulatory agencies put it into an effecta process that will take years.

In broad and significant areas, the legislation endows regulators with wholly discretionary authority to write and interpret new rules, lawyers at Skadden Arps wrote in a research note.

The bill has been criticized for failing to make changes to Fannie Mae and Freddie Mac, the government sponsored mortgage finance companies that have taken more than 145 billion from taxpayers since being seized in 2008.

White House spokesman Robert Gibbs said Republicans should not use that as an excuse to vote against the financial reform bill. We are going to reform Fannie Mae and Freddie Mac, Gibbs said Sunday on NBCs Meet the Press.

Reporting by Andy Sullivan Additional reporting by Matthew Lynley in New York and Corbett B. Daly in Washington Editing by Tim Dobbyn source