The US Senate [official website] on Thursday voted 60-39 [roll call vote] in favor of comprehensive financial reform legislation [HR 4173 materials; JURIST news archive], sending it to President Barack Obama [official profile]. The vote on the Restoring American Financial Stability Act of 2010 occurred after Democrats garnered the support [The Hill report] of Republican Senators Scott Brown (MA), Olympia Snowe (ME) and Susan Collins (ME) [official websites], securing the 60 votes needed to end debate. The legislation creates a new regulatory council to monitor financial institutions in order to prevent the companies from becoming "too big to fail" and will establish a new consumer protection division within the Federal Reserve [official website] to enforce rules against abusive business practices. It also gives the Federal Reserve the power to supervise the largest financial companies and report to the government any risks the firms may pose to the economy at large. The government will have the ability to seize and liquidate failing financial institutions before their collapse can have an adverse economic effect, and the bill permits banks to invest only 3 percent of their capital into hedge funds or private equity funds. The bill also creates regulations for the trading of derivatives. Shortly after the Senate vote, Treasury Secretary Timothy Geithner [official profile] praised the reform package [press release], stating:
[The bill is] the strongest financial reform this country has considered since the Great Depression. ... [The] reforms will restore the banking system to its core purpose of helping Americans save for their future and channeling those savings to the entrepreneurs with the best ideas for building a stronger America. These reforms will allow the government to make sure that [banks] do not threaten the health of the economy as a whole.Just before the Senate vote, House Minority Leader John Boehner (R-OH) [official website] called for the law's repeal should it pass. In a statement [text] released after the bill's passage, he explained why this was necessary:
[The bill] makes bailouts permanent, enshrines 'too big to fail' into law, and fails to reform the government mortgage companies that sparked the meltdown by giving high-risk loans to people who couldn't afford it, and it needs to be fixed. House Republicans offered a better solution to stop the Democrats' permanent bailouts, reform Fannie Mae & Freddie Mac, and protect taxpayers and help small businesses create jobs.Obama is expected to sign the bill [NYT report] next week.
Two weeks ago, the House of Representatives [official website] voted 237-192 [JURIST report] to approve the financial reform bill. The House and Senate reconciled their versions of the bill [JURIST report] last month but were forced to re-open negotiations, eventually removing a $17.9 billion tax on large financial institutions that was meant to cover the bill's costs. The Senate approved its version of the bill in May, after the House passed its version [JURIST reports] in December. The legislation closely mirrors a proposal put forth by the Obama administration [JURIST report] last June consisting of a broad series of regulatory reforms aimed at restoring confidence in the US financial system following the recent economic crisis [FT backgrounder; JURIST news archive]. Financial reform represents a cornerstone of Obama's legislative agenda since taking office in 2009, along with health care, immigration reform, climate change legislation, and the repeal of "Don't Ask Don't Tell" [JURIST news archives].