Wall Street Reform Clears Congress, Will Become Law

A sweeping overhaul of Wall Street firms and American financial institutions won final congressional approval Thursday afternoon when the Senate voted 60-39 to pass the reform bill.

Three Republicans voted with the Democrats to approve it and one Democrat, Sen. Russ Feingold of Wisconsin, voted against the bill. Because the House approved the same measure in June, the legislation will now go to President Barack Obama.

On Tuesday, Obama praised the legislation and promised to sign it next week. "What members of both parties realize is that we can't allow a financial crisis like this one that we just went through to happen again," the president said. "This reform will prevent that from happening."

Hours before Thursday's vote, Senate Majority Leader Harry Reid called the bill the most sweeping since the Great Depression and predicted it will put laws into place to prevent another financial meltdown like the one that nearly crippled the American economy in 2008.

"We're saying to those who gamed the system, the game's over," he said. "With this bill, we're saying no more bailouts, because no bank is too big to fail. We're going to hold Wall Street accountable because we know we're accountable to the American people."

Speaker Nancy Pelosi echoed Reid, saying of the impact on Wall Street, "The party is over."

The bill was authored by Democrats Sen. Chris Dodd and Rep Barney Frank. Once signed, the new law will create broad new federal oversight and regulations for financial institutions, including banks, hedge funds, insurance companies and even car dealers, all intended to crack down on the risks and highly leveraged transactions that defined the financial sector in the decade before the economic crisis.

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

The final legislation represents the latest compromise between House and Senate leaders, who have wrangled for nearly two years over the best way to respond to the 2008 financial crisis. Democrats were forced back to the negotiating table two weeks ago when Robert Byrd's death cost the measure a crucial vote in the Senate and gave Republicans more leverage to demand changes to the earlier agreement.

Earlier this week, Republican Sens. Scott Brown of Massachusetts and Susan Collins and Olympia Snowe of Maine, who voted for the Senate version of the bill last month, said they would also support the conference report after extra fees on large banks were dropped from the bill.

Despite the three Republicans' support, most GOP members of the House and Senate strongly opposed it. Even before the Thursday vote, House Minority Leader John Boehner panned the bill. "I think it ought to be repealed," Boehner said. After the House passed the bill, Boehner compared it to "killing an ant with a nuclear weapon."

Rep. Jeb Hensarling (R-Tex.), the top Republican on the House Financial Services' subcommittee on financial institutions and consumer credit, told Politics Daily that the bill fails to address what he sees as the initial cause of the financial collapse, namely the quasi-government mortgage giants Fannie Mae and Freddie Mac.

"The bill doesn't go to the root cause of the problem," Hensarling said when the House passed the bill. "If you have the wrong diagnosis you're going to offer the wrong remedy."

But Reid maintained that the only evidence he needs to believe that the bill will rein in Wall Street's risky habits is the opposition to it he's seen from Republicans and Wall Street bankers.

"Wall Street doesn't like this bill," Reid said. "Of course not. Why would they want us to change a system that made them all rich? This isn't about dollars and cents only, it's about fairness."

Click play below to watch a report on the financial reform vote from Carissa Kranz of Medill News Service: