Republicans Allow Debate on Financial Overhaul

Republicans Allow Debate on Financial Overhaul
By DAVID M. HERSZENHORN and EDWARD WYATT
Copyright by The New York Times
Published: April 28, 2010
http://www.nytimes.com/2010/04/29/business/29regulate.html?th&emc=th


WASHINGTON — With political pressure mounting, Senate Republicans relented on Wednesday and agreed to let Democrats open debate on legislation that would impose the most far-reaching overhaul of the nation’s financial regulatory system since the aftermath of the Depression.

The decision by Republicans to allow floor deliberations came after they voted three days in a row to block the bill, and it suggested that they saw political peril in being depicted as impeding tougher rules for Wall Street.

But Republicans still oppose many aspects of the bill, and a rough floor fight lies ahead.

Senate Republicans control enough votes to filibuster the bill and prevent it from being adopted.

President Obama praised the shift in the Senate at a rally in Quincy, Ill., and later in a rare chat with reporters on the plane back to Washington. “I want to work with anyone, Republican or Democrat, to move this legislation,” Mr. Obama said at the rally, adding, “What I don’t want is a deal made that is written by financial industry lobbyists.”

Before the logjam broke, Democrats on Wednesday threatened to keep the Senate in session overnight to dramatize the Republican opposition.

Republicans said they decided to move forward after talks broke down between leaders of the banking committee and it was clear they would win no further changes before debate.

At about 6:15 p.m., the majority leader, Harry Reid of Nevada, requested the unanimous consent of the Senate to begin debate, and there was no objection from the Republican side.

“Now let’s get to work,” Mr. Reid said. “And let’s do the utmost to make the American people proud of our efforts.” He added, “Wall Street needs reforming.”

While the Republicans can still filibuster, they are at a disadvantage during floor debate given the Democrats’ 59 to 41 majority. And the decision to allow floor debate appeared to be a significant retreat by the minority, reflecting a calculation that further delay was politically untenable.

Among the challenges for Republicans was explaining how they could participate in an oversight hearing on Tuesday criticizing Goldman Sachs executives and proclaiming the need to tighten regulation of Wall Street, but then go to the Senate chamber and vote to block debate of the financial regulatory bill.

In an appearance on Wednesday morning on the “Today” show on NBC, Senator Susan Collins, Republican of Maine, a centrist who is known for working across party lines, faced a series of tough questions on that issue. Later in the day, Ms. Collins was among the first Republicans to say it was time to open debate. “Negotiations have concluded,” she said. “It makes sense to proceed to the floor.”

The Republicans met late Wednesday afternoon to discuss the financial regulatory legislation and the steps ahead, and they defended their blocking maneuvers, saying it had helped secure assurances that changes would be made to the legislation, particularly in a chapter on liquidating failing companies.

Democrats, however, said that they had made no firm commitments other than to take up Republican concerns during floor debate, where amendments on any controversial issue typically require 60 votes to be approved.

In particular, Republicans said they had won the elimination of a proposed $50 billion fund that would be paid for by big financial companies and would be used to help pay for putting failed banks out of business.

The Obama administration also had opposed the fund, out of concern that it would complicate efforts to deal with more costly bank failures. And the Democrats had already indicated a willingness to remove the fund from the bill.

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, said that his efforts to negotiate important changes to the bill had mostly fallen apart. And he raised particular complaints with a provision to create a new consumer protection bureau that he said would be too powerful.

“I believe we owed the American people our best effort to make whatever changes we could to this incredibly complex piece of legislation, because it will have wide-ranging implications for our economy,” Mr. Shelby said in a statement.

The legislation is intended as a comprehensive answer by Congress to the 2008 economic crisis, which required a $700 billion emergency government rescue and taxpayer-financed bailouts for Wall Street powerhouses.

The House approved its version of a financial regulatory overhaul in December, and any legislation adopted by the Senate would have to be reconciled with that measure.

Floor debate is expected to begin in earnest on Thursday and last at least two weeks, and lawmakers in both parties are likely to bring forward a long list of amendments. Several Republicans have expressed concerns about overregulation that could stifle the economy, while some liberal Democrats contend that the bill is not tough enough on Wall Street.

The bill, developed in months of talks between senators in both parties, would touch virtually every aspect of the financial system.

It would authorize the government to shut down a financial institution deemed to pose a threat to the stability of the nation’s banking system and securities markets, and it would establish a consumer protection bureau intended to end predatory lending practices by, among other things, requiring that consumers receive detailed information on mortgages and other financing.

It would provide new oversight of hedge funds and impose tough rules on the trading of derivatives, the complex instruments at the center of the crisis.

Republicans, in blocking debate, said there were numerous problems in the Democrats’ legislation — including the omission of provisions dealing with the government mortgage finance giants, Fannie Mae and Freddie Mac, and problems with specific language.

But the Republicans won no guarantees of concessions on any of these matters.

Still, Mitch McConnell of Kentucky, the Senate Republican leader, said that the delay had highlighted his party’s concerns, which he said he hoped would be addressed during floor debate. And he praised the Republicans and the lone Democrat, Senator Ben Nelson of Nebraska, who had voted to block debate, saying they had provided an opportunity to improve the bill.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, said he would work to make sure senators in both parties could offer amendments to the bill, of which he is the prime sponsor. “It’s time for this debate to begin,” Mr. Dodd said in a statement. “And it must be a serious, vigorous debate.”

But Mr. Dodd, in his statement, also accused Mr. Shelby of seeking to weaken provisions in the bill to create a consumer protection bureau.

“I cannot agree to his desire to weaken consumer protections given the enormous abuses we have seen,” Mr. Dodd said.

Both sides said they expected an intense floor debate. “It’s a pretty big bill, and it has got a lot of complexities,” said Senator Bob Corker, Republican of Tennessee, who helped draft the legislation on the banking committee. “This may be a real debate, which might shock America.”

Carl Hulse contributed reporting from Washington, and Helene Cooper from Quincy, Ill.