Senate Passes Financial Reform Bill

Last night, the Senate passed a financial reform bill which creates/restores financial rules and regulations ostensibly designed to prevent another economic clusterfucktastrophe triggered by irresponsible lending, unchecked greed, and other chicanery on Wall Street.

In providing for the most profound remaking of financial regulations since the Great Depression, the legislation would create a new consumer-protection watchdog housed at the Federal Reserve to prevent abuse in mortgage, auto and credit card lending. It also would give the government power to wind down large failing financial firms and set up a council of federal overseers to police the financial landscape for risks to the global economy. Moreover, the legislation would establish oversight of the vast market in financial instruments known as derivatives, impose new restrictions on credit rating agencies and give shareholders a say in corporate affairs.

Senate Majority Leader Harry Reid (D-NV) said: "When this bill becomes law, the joy ride on Wall Street will come to a screeching halt" (if only!) while Sen. Richard Shelby (R-AL), "the GOP's top financial reform negotiator," said the bill is "a liberal activist's dream come true" (if only!).

Democratic Senators Maria Cantwell and Russ Feingold voted against the bill because it did not go far enough. Four Republican Senators—Olympia Snowe, Susan Collins, Chuck Grassley, and Scott Brown—voted with the Democrats to pass the bill.

The US Chamber of Commerce hates it, which means it's pretty good, even if imperfect.

And some Senate Democrats showed shocking evidence of spine-ownership during the process: The original draft of the bill introduced by Senator Chris Dodd, chairman of the banking committee—who marshaled the bill through the Senate, navigating a Republican filibuster and dozens of amendments in the process—was more liberal, but Dodd had to water it down after lobbyists and the Obama administration attacked the bill for being too far-reaching. But many of those aforementioned amendments reinfused the bill with liberal ideals:

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.

The bill now goes into conference so that the House and Senate versions can be resolved before the final bill is sent to the President. In a weird and unusual twist, the Senate version is now actually more liberal than the House version, despite the Senate being the more conservative of the two houses, so resolution should be pretty swift.