Wall St overhaul fails to clear Senate hurdle

15Jan

The US Senate failed to end debate on the most sweeping overhaul of financial industry rules since the Great Depression of the 1930s, clouding the fate of a key White House priority.

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Lawmakers voted 57-42 to move to final passage of the legislation, falling just shy of the 60-vote threshold needed to advance President Barack Obama’s top domestic goal amid deep election-year anger at big banks.

Democrats described the move as a stinging but temporary procedural setback, with Senate Majority Leader Harry Reid of Nevada vowing to rally the necessary support to “pass and enact Wall Street reform as soon as possible.”

Bucking their leaders, who had hoped to hold a final vote as early as Thursday, two of Obama’s Democratic allies joined all but two Republicans to turn back the motion, setting the stage for more bitter debate on the bill.

The measure aims to rein in big firms’ use of high-risk practices blamed for the global economic meltdown of 2008, end taxpayer-funded bailout of financial titans previously deemed “too big to fail,” and create an unprecedented consumer protection agency to shield Americans from industry abuses.

It also aims to curb big banks lucrative, largely unregulated business in complex securities called derivatives, essentially bets on the future cost of an asset, which many businesses use to control risk from volatile prices.

And it includes several measures aimed at increasing the transparency at the US Federal Reserve and the central bank’s accountability.

Democratic Senators Maria Cantwell and Russ Feingold voted against ending the process of amending the legislation. Republican Senators Olympia Snowe and Susan Collins joined the majority of Democrats.

Reid cast a tactical “no” vote that enabled him to use parliamentary rules that let him bring the measure to a vote at any time when, and if, he secures the necessary support.

Democratic Senator Arlen Specter of Pennsylvania, defeated in a party primary late Tuesday, did not return to Washington in time to vote.

“Today, Republicans again made clear whose side they’re on. They chose to stand with Wall Street, allowing another day to go by in which too many Nevadans and Americans are left vulnerable to big bankers greed,” said Reid.

Passage of the bill would trigger a “conference” between delegates from the Senate and House of Representatives to reconcile their rival versions of the legislation into one compromise measure.

That bill would need to be approved by both chambers before going to Obama to sign into law.

The vote capped another day of vigorous debate and behind-the-scenes wrangling over the bill, notably over a key provision aimed at getting big banks to quit their lucrative, largely unregulated, derivatives business.

Experts have blamed reckless speculation in derivatives for fueling the 2008 collapse, but the financial industry had sharply objected to Senate Agriculture Committee chair Blanche Lincoln’s proposed restrictions.

Democratic Senate Banking Committee chair Chris Dodd, the legislation’s key author, introduced a measure gutting Lincoln’s proposal late Tuesday — but by midday Wednesday, he had backed off after she objected to his move.

Democrats were also feuding over proposals like a plan to cap fees at automated tellers, and another limiting big banks abilities to engage in proprietary trading.

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