Just as Congress was on the verge of passing the broadest overhaul of financial regulation since the Great Depression — following hundreds of hours of debate over the last year — lawmakers are back at the drawing boards. Freshman Republican Sen. Scott Brown objected to a stiff new banking fee which would cover the $19 billion cost of implementing the new regulation.
"It is especially troubling that this provision was inserted in the conference report in the dead of night without hearings or economic analysis," Brown, R-Mass., wrote to the Democratic lawmakers shepherding the legislation through Congress. "Costs would be passed on to the millions of American consumers and small businesses who rely on major U.S. financial institutions for their checking, ATM, loans or other services."
Brown's constituents include the country's largest mutual funds, such as Fidelity Investments and State Street Corp., which objected to paying a fee when it was excesses in the banking industry at the heart of the financial crisis that sparked a worldwide recession.
Just days after House and Senate negotiators concluded two weeks of work to meld the two versions of the financial overhaul legislation into a single conference report, lawmakers were forced to reconvene Tuesday evening to find another way to pay for the sweeping measure. Over Republican objections that it was a budget gimmick, the conference committee agreed to a plan covering the costs with $5.7 billion from raising premiums that banks to pay into the Federal Deposit Insurance Corp. and unspent funds in the $700 billion Troubled Asset Relief Program.
The death of Sen. Robert Byrd, D.-W.Va., on Monday will make the final vote in the Senate even closer than it would have been. Democrats need 60 votes to pass the measure, which means either winning support from the two Democrats who previously voted against the bill — Sen. Russ Feingold of Wisconsin and Maria Cantwell of Washington — or swaying two moderate Republicans ,such as Chuck Grassley of Iowa, Susan Collins of Maine, Olympia Snowe of Maine, or Brown. The House has a larger Democratic majority and expects to approve the measure as early as this week.
Policy experts predicted that congressional leaders will win approval after addressing Brown's objection.
"It's a hiccup," said Dan Crowley, a partner at K&L Gates, a law firm representing financial services companies. "They've got so much leverage, unless one of the holdout senators wants to be parking at Union Station, they'll find a way to pass the bill."
Even some on Wall Street would welcome the certainty that final legislation would bring. "The passage of this bill represents an important milestone that will go some way to alleviating the uncertainty that has been weighing on the sector," wrote Richard Ramsden and other Goldman Sachs analysts in a June 28 research report.
The 2,319-page legislation would create a new regulatory agency to look out for consumers; strengthen mortgage industry practices; curb banks' proprietary trading and use of over-the-counter derivatives; impose new oversight of the financial services industry and large firms that could threaten market stability; and increase capital requirements on banks in an attempt to prevent a repeat of the financial crisis.
"After great debate, we have produced a strong Wall Street reform bill that will fundamentally change the way our financial services sector is regulated," said Senate Banking Committee Chairman Christopher Dodd, D-Conn. "The American people have called on us to set clear rules of the road for the financial industry to prevent a repeat of the financial collapse that cost so many so dearly."