Tuesday, July 13, 2010

Wall St bill moves toward final votes in US Congress

WASHINGTON: The biggest rewrite of US financial rules since the 1930s appeared to gain the support it needed on Monday, July 12 for final congressional approval as three key Republicans said they would support the measure.

As lawmakers returned from a weeklong break, Republican senators Olympia Snowe, Susan Collins and Scott Brown said they would vote for the bill, which would impose tough new restrictions on the industry in an effort to avoid a repeat of the 2007-2009 financial crisis.

"Wall Street reform is a step away from heading to the president's desk to be signed into law," said Democrat Chris Dodd, the measure's chief backer in the Senate.

Even though it was still not clear whether the 60 votes needed to advance legislation in the 100-seat Senate were certain, Democratic Leader Harry Reid said he intended to bring the bill up for a vote later in the week.

"We will finish our work on this bill this week to ensure that these critical protections and accountability for Wall Street are in place as soon as possible," Reid said in a statement.

The House of Representatives has already approved the measure and Democrats are eager to send a final version on to President Barack Obama to sign into law.

Analysts ' and opponents of the bill ' expect the bill to ultimately reach Obama's desk. "It's a question of when," Republican Senator Judd Gregg, an opponent, told CNBC.

Passage would give Obama's Democrats a second major legislative achievement, alongside healthcare reform, to show voters as they try to minimize Republican gains in elections this November.

It also would allow them to capitalise on public disgust with Wall Street, which sucked up hundreds of billions in bailout funds as the financial meltdown pushed the wider economy into a deep recession.

"By cleaning up Wall Street, we're going to make sure big bankers can't again gamble away our economy," Reid said on the Senate floor.

The crucial test could come as soon as Wednesday, when Reid will need to muster 60 votes to overcome an expected Republican procedural hurdle. Reid will probably move on Tuesday to set up that vote, an aide said. If successful, final passage of the legislation could come soon after.

At this point, Reid can probably count on 59 lawmakers to back the bill. With most Republicans firmly in opposition, a handful of lawmakers could determine its fate.

Democratic Senator Ben Nelson said he still had questions about the final bill and declined to say whether he would vote for it.

Nelson, who voted for an earlier version of the legislation, told reporters he was concerned about how regulators would implement the bill once it becomes law.

"Mostly we're looking at what we don't know. When we figure out what we don't know it'll be helpful," he said.

Republican Charles Grassley is also viewed as a possible backer, though an aide said he has qualms about the final version.

If both Nelson and Grassley decide to oppose it, Reid could wait until West Virginia Governor Joe Manchin names a successor to temporarily fill the seat of Democratic Senator Robert Byrd, who died at age 92 last month.

Manchin is expected to appoint a Democrat who would back the bill, but he will not act until state officials sort out plans to elect a permanent successor, according to a spokesman. That may take until at least Sunday.

The legislation would impose a range of new restrictions on the financial industry, from increased scrutiny of consumer loans to limits on their trading activities.

The KBW Banks Index closed up 0.16% on Monday, in line with the broader markets. Since hitting a 2010 high in April, the index has fallen nearly 15% as concern grew that the legislation would reduce industry profits.

Brown, Collins and Snowe all were able to shape the bill to address their concerns. Snowe won protections for small business and Collins added a provision that will require many banks to set aside more capital to ride out tough times.

Brown softened the bill's impact on mutual funds and other significant players in his home state of Massachusetts.

The industry softened the impact of many of its harshest provisions during a final all-night negotiating session at the beginning of July, and will have a chance to soften it further in coming years as regulators gradually put it into effect.

Lawmakers are also expected to revisit the topic with a "technical corrections" bill to fix errors in the 2,300-page bill. That could address questions like whether new restrictions on the US$615 trillion (RM1.96 quadrillion) derivatives market would apply to existing contracts. ' Reuters


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