Obama: Sweeping Financial Reforms Will 'Hold Wall Street Accountable'

It took 20 hours and some frantic, last-minute dealmaking, but House and Senate negotiators wrapped up a marathon session Friday morning with a final deal to overhaul the American financial system nearly two years after the 2008 crisis that brought the American economy to the brink of collapse.

Just before 6 a.m. Friday, bleary-eyed lawmakers approved the House-Senate conference committee report on a party-line vote of 27-16 after a grueling two-week session that Sen. Chris Dodd (D-Conn.) compared to living in purgatory.

But as President Obama departed for the G-8 Summit hours after the lawmakers finished their work, he praised the deal as the toughest financial reform since the aftermath of the Great Depression.

"Our economic growth and prosperity depend on a strong, robust financial sector," Obama said. "But we've all seen what happens when there's inadequate oversight and insufficient transparency on Wall Street." He added, "The reforms making their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we're still recovering from."

Despite the all-night session required to push the final conference package through, leaders of the committee said Friday they were gratified by the result.

"It's a great moment. I'm proud to have been here," Dodd, chairman of the Senate Banking Committee, said after the package was approved.

Rep. Barney Frank, chairman of the House Financial Services Committee, called the conference "the most extraordinary experience."

"You hate to have the kind of pain that so many people went through in this economic crisis, but it just doubled our resolve to get it done," he said.

In contrast to the Democrats' enthusiasm, Republicans who voted against the bill, including Sen. Richard Shelby (R-Ala.), complained that Democrats did nothing to address what they see as the root cause for the 2008 meltdown -- namely the mortgage giants Freddie Mac and Fannie Mae, which both escaped new regulations in the bill.

Several GOP members also warned that the new federal powers created by the bill will impede America's once free-market economy from thriving in the future and will encourage multinational financial firms to relocate to countries with less restrictive regulations.

The legislation that passed the committee Friday will create broad new oversight and regulations for financial institutions, including banks, hedge funds, insurance companies and even car dealers, all designed to rein in the risks and highly leveraged transactions that defined the financial sector in the decade before the economic crisis.

Once implemented, it will empower the government to seize and unwind failing financial firms; establish a 10-member Financial Stability Oversight Council to monitor systemic risk in the financial system and order the seizure of failing banks; create a new agency for financial consumer protection under the Federal Reserve to oversee most loan products, including credit cards, mortgages and car loans; and establish new requirements for derivatives to be traded publicly through exchanges and clearinghouses.

One key provision authored by Sen. Blanche Lincoln (D-Ark.) will require banks to spin off their derivatives trading units to an affiliate within two years. Lincoln had initially proposed a complete ban on federally insured banks from engaging in any derivatives trading, but vocal bipartisan objections, especially from the New York delegation, forced Lincoln to compromise on her language.

Another measure, authored by Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) and inspired by the "Volcker Rule" -- first proposed by former Federal Reserve Chairman Paul Volcker -- will prevent banks from proprietary trading through their own hedge funds.

The bill will now go to the House and Senate for final approval next week. Although the measure will easily pass the House, its fate in the Senate rests in the hands of the four Republican senators who voted for it in May -- Scott Brown of Massachusetts, Iowa's Charles Grassley and Maine's Susan Collins and Olympia Snowe. Two Democrats, Russ Feingold of Wisconsin and Maria Cantwell of Washington, opposed the bill in the spring and are not expected to approve the conference report.

But Obama said he feels sure the bill will make it to his desk quickly. When asked if it will pass the Senate, he responded with a confident "You bet."