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Senate Democrats beat back an amendment to their financial reform bill from Sen. John McCain [R, AZ] on Tuesday that would have required the government to release Fannie Mae and Freddie Mac from their control and force them to sink or swim in the free market like all the other financial companies. The amendment was defeated by a vote of 43-56, with all Republicans voting in favor along wit two Democrats -- Sen. Evan Bayh [D, IN] and Sen. Russell Feingold [D, WI].

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A Failed Vote on Breaking up Banks

May 7, 2010 - by Donny Shaw

The Senate last night voted on a financial reform amendment that, although probably never having a real shot at passing, gives us a unique chance to see in the stark relief the divisions in both parties on truly reining in the "too big to fail" banks.

The amendment, a version of the SAFE Banking Act sponsored by Sens. Sherrod Brown [D, OH] and Ted Kaufman [D, DE], would have placed strict size caps on banks and non-bank financial companies. In practical terms, it would have forced the breaking up of some of the Wall Street corporations. Instead of consolidating like they have been doing for the past 20 years, banks like Bank of America and Chase would have been forced to sell some of their branches off to smaller regional banks over a period of three years.

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After making some major changes late in the day today, Sen. Bernie Sanders' [I, VT] amendment to audit the Federal Reserve has the support of Banking Committee Chairman Sen. Chris Dodd [D, CT] and the White House, both of whom were concerned that opening the Fed up to audits would threaten their independence.

The revised amendment (.pdf) would not amend U.S. law so as to indefinitely open up the Fed to full audits like the original amendment would have. Instead it is focused on making information about the Fed's actions in response to the financial crisis public. It would reveal information about which banks received special deals from the Fed, how much money they got, and when we can expect to get it back. But after that, the Fed would go back to operating under the same level of secrecy they enjoy currently.

Specifically, based on my reading of the legislative text, here's what's in the revised amendment.

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Financial Reform Amendment Voting Begins

May 5, 2010 - by Donny Shaw

Remember last week when Senate Republicans filibustered beginning debate of the financial reform bill three times in three days over objections to a liquidation fund that they said would be used in the future for bailouts? Well, the fund was officially removed on Wednesday by a an overwhelming vote of 93-5. That makes everyone happy -- the Republicans who called it a bailout, the banks who didn't want to pay into it, and the Democrats who didn't really care much about it and would rather have Republican cooperation.

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If the pre-funded "orderly liquidation fund" is dropped, the financial reform bill will increase the deficit, not reduce it. According to This morning's Congress Daily ($), Banking Committee Chairman Sen. Christopher Dodd [D, CT] and Ranking Member Sen. Richard Shelby [R, AL] are close to an agreement on dropping the fund, which Republicans have been attacking as a "sluch fund" that "guarantees" future bailouts. In reality, the fund would be used to pay for liquidating (a.k.a. killing) failing mega-banks, not bailing them out.

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GOP Again Sustains Filibuster of Financial Reform

April 27, 2010 - by Donny Shaw

Expect to see this headline over and over. In lieu of a breakthrough bipartisan deal, the Democrats are planning to hold procedural votes every day on ending a Republican filibuster of debating the Restoring American Financial Stability Act of 2010. They're not planning on stopping until the Republicans give up or a deal is struck.

For the second night in a row, the Senate voted 57-41 against beginning debate. Sixty votes were needed for passage. Sen. Ben Nelson [D, NE] broke ranks and voted with the GOP again (apparently he still hasn't had time to read the bill) and Majority Leader Sen. Harry Reid [D, NV] voted against the motion again in order to preserve his right to bring it up for another vote under Senate rules.

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Why Ben Nelson Voted No

April 26, 2010 - by Donny Shaw

Sen. Ben Nelson [D, NE] surprised just about everyone when he voted "no" Monday evening on beginning debate of the Democrats' financial reform bill. Immediately, speculation began circulating that he voted against the bill to curry favor with legendary investor Warren Buffet, a constituent, who had a regulatory exemption he supported for existing derivative contracts removed from the bill just one day prior.

The jury's still out on that. Nelson hasn't admitted to protecting Warren Buffet's interests. Instead, he issued a confounding statement on his vote that begins like this:

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As expected, Senate Republicans have successfully sustained their filibuster of debating of the Democrats' financial reform bill, the Restoring American Financial Stability Act of 2010. They stuck together and even one over one Democrat tonight on a motion "to invoke cloture on the motion to proceed" -- or ending debate on whether or not to begin debate the bill itself -- which required 60 votes for approval. It was rejected 57-41. Moderate Dem Sen. Ben Nelson [D, NE] sided with the Republicans, and Majority Leader Sen. Harry Reid [D, NV] voted against the bill in order to preserve his right to bring the bill back to the floor again for another vote in the future.

But the Democrats aren't giving up. Here's what happens next.

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The Congressional Budget Office has released their "score" for the financial reform bill (a.k.a. the Restoring American Financial Stability Act of 2010), and it looks like more good news for the Dems. Reuters reports:

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What Happened to Auditing the Fed?

April 21, 2010 - by Donny Shaw

One of the great political success stories of the past couple years has been the audit the Fed movement. Starting with an unlikely partnership between the far-right Rep. Ron Paul [R, TX-14] and far-left lawmakers Rep. Alan Grayson [D, FL-8] and Sen. Bernie Sanders [I, VT], the push to open up the Federal Reserve to a complete government audit for the first time ever (H.R.1207) has attracted more than 300 co-sponsors in the House and was included in the House's financial reform bill that was approved last December.

But now that financial reform has moved into the Senate, the audit the Fed proposal has disappeared from the bill and there is virtually no talk of trying to put it back in. Instead, the Senate financial reform bill as written by Banking Committee Chairman Chris Dodd [D, CT] includes a section that looks deceptively like a Fed audit, but would actually do nothing to open up the Fed or remove the special audit restrictions that have allowed the Fed to operate in secrecy for decades.

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Financial Reform Roundup

April 16, 2010 - by Donny Shaw

The big Wall Street reform bill (S.3217) could hit the Senate floor as soon as next week. The legislative pieces are falling into place, the White House is staking out its position and the Republicans are firming up commitments of opposition from their more moderate members. Here's a roundup of the latest financial reform news out of the Senate.

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Dodd Fights the Financial Reform Smears

April 14, 2010 - by Donny Shaw

The Democrats really do seem to have a new fire behind them as they are starting to take up financial reform. Yesterday, we heard that Sen. Blanche Lincoln [D, AR] of all people would be leading the Democrats on a tough derivatives reform bill. Today, Banking Committee Chairman Sen. Chris Dodd [D, CT] took to the Senate floor and unhesitatingly fought back at Minority Leader Sen. Mitch McConnell's [R, KY] false claims that the financial reform bill would lead to endless bank bailouts. Here's the video:

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Salmon on Lincoln

April 13, 2010 - by Donny Shaw

Yesterday, Sen. Blanche Lincoln [D, AR] surprised just about everyone (including yours truly) by announcing that her derivatives bill was going to be stronger than anything we've seen from Dodd, the House of Representatives, or the White House. Felix Salmon has a helpful post clearing up some confusion between exchange trading and clearing requirements, and outlining what we can expect in her bill, which will officially drop tomorrow:

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Benjamin Sarlin has a great piece at the Daily Beast on the state-of-play of derivatives reform now that it's moving under the jurisdiction of Sen. Blanche Lincoln [D, AR] and the Agriculture Committee.

He has a Lincoln staffer is on record saying that the derivatives bill she's writing, which will be dropped in the next couple weeks, will at least require all derivatives to be traded publicly on exchanges. That's a relatively big deal in that it tells us where we should be watching for possible derivatives dealer (a.k.a. the big banks) giveaways, namely in clearing exemptions and margin requirements for swaps that are exempt from clearing. We already know that Lincoln is planning to put exemptions for "end-users" in her bill. If it's anything like the House bill, up to half of all swaps could be exempt from clearing.

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Which Senators are Flush with Finance Cash?

April 8, 2010 - by Donny Shaw

"The banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." - Sen. Dick Durbin [D, IL].

In a few weeks, the banks' "ownership" of Congress will be put to the test. The Senate is going to take up comprehensive financial regulatory reform legislation in May -- this is the main bill the banks are spending their political capital on to fight, and the Senate is where they are hoping to use their influence and make it friendlier to their business.

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