Debate stalls on Wall St. overhaul
One Democrat’s defection stings party’s Senate push; Brown says GOP compromise would protect Mass. firms
WASHINGTON — Senate Republicans, including Scott Brown of Massachusetts, united with a lone Democrat yesterday to block debate on legislation designed to overhaul the nation’s financial regulations and prevent a repeat of the 2008 economic meltdown.
The 57-to-41 vote — three shy of the number that Senate rules say are needed to end the filibuster and proceed — is a setback for Democrats who have been pushing for the biggest overhaul of financial regulations since the Great Depression. It could give Republicans, who oppose several key aspects of the proposal, more momentum in brokering a bipartisan compromise.
Polls suggest the legislation is popular with the public, but it has drawn strong opposition from securities industry lobbyists. Democrats appeared intent on pushing forward, betting that Republicans will eventually cave under public pressure to support the bill.
Majority leader Harry Reid planned to file another motion last night that could force votes today and tomorrow, allowing Democrats to continue pounding their theme that Republicans are in league with Wall Street bank executives.
Although Brown said he is willing to support a compromise, he accused Democrats of pushing for a vote yesterday in a bid to embarrass Republicans.
Brown for the first time listed his specific objections to the Senate Banking Committee bill: He wants a $50 billion fund to liquidate failing firms stricken from the bill, calling it a “slush fund’’ and saying fees imposed on banks to raise the money would be passed on to consumers. He also is seeking exemptions from some new provisions for insurance companies and mutual funds, which are heavily represented in Massachusetts.
“The orders apparently have been given from higher above to just push it forward, score some political points,’’ the Massachusetts Republican said in a brief interview after he voted. “There’s no reason to go to a vote today except to spot the Republicans, to say we’re in favor of Wall Street and they’re in favor of Main Street — yeah, I get it. But it’s time to move on.’’
It was a crucial vote for Brown. His moves on financial legislation are likely to leave the biggest imprint on his first months on the job, giving Republican leaders the leverage they need to delay or block financial regulatory changes.
It is a political risk for Brown, who will be blamed by Democrats for scuttling the overhaul if GOP leaders don’t end up cutting a deal. Highlighting the dangers, a liberal group, Americans United for Change, immediately sought to tie his vote to campaign contributions he received from financial executives.
But Brown, who has denied being influenced by corporate contributions, said yesterday he is confident the compromise talks will result in “a good, strong, bipartisan bill.’’
“They’re so close, they really are,’’ he said.
Republicans were united in their opposition to letting the debate move forward. Senator Ben Nelson of Nebraska was the only Democrat to join Republicans in voting against it; he offered no reason, but earlier in the day had raised questions about language in the legislation concerning a complex financial product called derivatives. Two Republican senators were not present for the vote and at the last minute, Reid changed his vote to a “no,’’ a tactical move that will allow him to bring the matter up again as early as today.
In a move that could deepen the partisan gap and possibly doom a compromise, Republicans are considering introducing an alternative bill.
Senator John F. Kerry, a Democrat and a senior member of the Finance and Commerce committees, was critical of Republicans without mentioning his Massachusetts colleague specifically, saying “they should at least allow the debate to go forward.’’
“This is not a good moment for the United States Senate,’’ Kerry said last night in a statement. “It’s been nearly two years since the Wall Street meltdown and still the Republicans are blocking reforms to end the policies that allowed it to happen in the first place. Every day that goes by without reform is an invitation to more taxpayer bailouts and Wall Street greed over reform to protect Main Street.’’
Democrats pounded their message that Republicans are stalling in a bid to protect investment and banking officials from stricter regulations.
‘A party that stands with Wall Street is a party that stands against families and against fairness,’’ Reid said from the Senate floor before the vote. “As far as I can tell, the only thing the Republicans stand for is standing together.’’
Several minutes later, Senate Republican leader Mitch McConnell successfully rallied his side.
“All of us want to deliver a reform that will tighten the screws on Wall Street,’’ McConnell said, denying any stall tactics. “But we’re not going to be rushed on another massive bill based on the assurances of our friends on the other side.’’
The legislation is designed to crack down on practices that led to the economic collapse in 2008, when the federal government had to intervene with a $700 billion program designed to prop up failing financial institutions deemed “too big to fail.’’
It would establish a system for shutting down failing firms without disrupting the entire financial system.
It would also establish a council that would be charged with monitoring the system for potential problems, and would establish a consumer protection agency to help prevent people from getting into trouble with mortgages and credit cards they can’t afford.
The bill also aims to crack down onderivatives, which played a key role in the economic collapse. Financial firms, for example, bet on the direction of thousands of bundled home mortgages that later failed because the mortgages were issued without adequate credit.
Under the current legislation, the trading of such derivative products would have to be done on an open market, and some firms would be unable to continue their operations.
At least two Republican senators — Olympia Snowe of Maine and Charles Grassley of Iowa — support the bill’s approach on derivatives.
One of the main targets of Republican opposition has been the $50 billion fund to wind down failing institutions.
Republican opponents have said that it could still allow for bailouts of large firms.
But not all Republicans are united on that. Senator Bob Corker, a Tennessee Republican and a key negotiator, last week defended the fund and said the GOP’s lines of attack “miss the point and I think take us off on a bunch of rabbit trails.’’
Republicans also oppose the so-called Volcker rule, named for former Federal Reserve chairman Paul Volcker. The rule would put new investment restrictions on large institutions, including preventing them from owning private equity funds.
Massachusetts life insurance companies oppose the provision because it would force them to stop investing in the Massachusetts Capital Resource Company, a consortium formed in 1977 that has invested about $575 million in 300 businesses.
Brown wants the Volcker rules to be changed so that it doesn’t affect the current practices of insurance and mutual fund companies.
He also said he wants state-chartered banks to continue being regulated by the Federal Reserve, rather than shifting oversight to the FDIC.
Brown praised several aspects of the bill, however, saying he supports regulating derivatives, and the creation of a council to monitor potential risks within the financial industry. He also said he largely supports having a consumer protection agency.
Matt Viser can be reached at email@example.com.