This vote was on passing a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee financial derivatives. Derivatives are, in essence, very complex financial contracts that businesses use as a hedge against large changes in the price of some commodities such as gasoline, but that have also become popular with speculators. Speculation in derivatives, relatively unhampered by regulation, is often blamed for partially contributing to the financial meltdown in 2008. One of the ways the bill seeks to strengthen consumer protections is to create a new regulatory agency with the authority to write new rules overseeing banks and other institutions that offer financial services to consumers. The bill also would create a new process through which the federal government could break up large financial institutions that are in risk of collapsing.
President Obama has made this Wall Street overhaul one of his top priorities. Democrats say the bill would help prevent the kinds of activities that contributed to the 2008 financial collapse, but Republicans argue that in fact the bill would just open the door to more financial malfeasance.
Republicans spent much of their time on this bill unsuccessfully offering amendments to restrict the powers of the new consumer regulatory body, eliminate them completely, or instead locate them inside already-existing institutions, mostly unsuccessfully. They also complained that the bill does little to prevent another financial catastrophe on the scale of the 2008 collapse, in part because they did not think it does enough to address the real estate and loan crisis that contributed.
Richard Shelby, R-Ala., said the bill “represents a fundamental failure of this body to do its own due diligence before we even attempt such a significant undertaking as we are about to tonight. Millions of people lost their jobs, their homes, and trillions of dollars of wealth. The American people expect more and certainly deserve more, I believe, from us.”
“Nonetheless, it certainly did not take much investigation to know that the heart of the crisis was massive failures in our mortgage underwriting and securitization systems. Therefore, the most incredulous[sic] shortcoming of this bill, in my judgment, is the lack of any serious attention by the Senate being paid to the government-sponsored enterprises that we know as Fannie Mae and Freddie Mac,” Shelby said.
Democrats countered that Republicans are obfuscating the purpose of the bill and alleged that they are in cahoots with Wall Street in opposing the bill.
“Getting to this point was no small feat given the near-unanimous opposition to Wall Street reform that this effort has encountered from the other side of the aisle. But Senators Dodd and Reid persevered because they know that fixing our troubled financial system is absolutely, unequivocally in the best interests of our country and its citizens,” said Patrick Leahy, D-Vt. “The bill we are voting on today goes directly at the heart of the Wall Street excesses that brought our economy to the brink. For far too long Wall Street firms made risky bets in the dark and reaped enormous profits. Then, when their bets went sour, they turned to America’s taxpayers to bail them out. This bill is about changing the culture of rampant Wall Street speculation and doing what needs to be done to get our economy back on track. We need more transparency and oversight of Wall Street, and this legislation finally will allow regulators to go after the fraud, manipulation, and excessive speculation on Wall Street.”
By a vote of 59-39, the bill was passed. All but two Democrats present voted for the bill. All but four Republicans present voted against the bill. The end result is that the Senate passed a bill that would create new consumer financial protections and strengthen financial regulatory oversight and management structures, with the intent of preventing another financial collapse such as the one that occurred in 2008.