House Expected to Approve Financial Overhaul Friday
The House is expected to approve by a healthy margin a legislative package of sweeping financial reforms as early as Friday, according to a senior Congressional staffer.
Debate begins Wednesday afternoon and will continue Thursday on the 1300-page "Wall Street Reform and Consumer Protection Act", which has nine major pieces, covering everything from too-big-to-fail firms to derivatives trading to banking regulation.
Various amendments will also be taken up.
"I don't think we'll get 300 votes," said the source, who speculated that as many as a dozen or so of the 178 Republican members would vote in favor of the bill. Many of the 262 Democrats in the House are expected to support the bill.
Some of the bill's tougher measures, such as the creation of a consumer financial protection agency and guidelines on executive compensation, have drawn votes pretty much on party lines. Others have yielded greater margins of victory.
When the House Financial Services committee chaired by Rep. Barney Frank (D-Mass) began working on the first of the bill’s many parts in June, there was some hope President Obama—whose economic team laid out a blueprint for Congress—would sign the bill into law by year's end.
The Senate’s version of the complicated and controversial bill meant to prevent another financial crisis is in a state of limbo. It's chief sponsor, Sen. Chris Dodd (D-Conn.), who chairs banking committee, has encountered significant opposition on a number of issues at the committee level from both Democrats and Republicans.
Committee negotiations are under way, but there's little chance of a vote in the near future, even if a draft bill is agreed upon.
Dodd has said he's prepared, if necessary, to drop the bipartisan effort and win enough votes from the Senate's 60 Democrats, but negoitaions remain active.
"Sen. Dodd is meeting with banking committee members every day to produce a strong package as soon as possible," a Dodd spokeswoman said.
"There's a bipartisan product that can be had." said Mark Calabria, of the Cato Institute, who previously worked for the banking committee's senior GOP member, Sen. Richard Shelby (R-Ala.),
The GOP, for instance, is concerned that the Democrat proposals on too-big-too-fail firms would essentially institutionalize federal bailouts.
"The consumer product agency thing will continue to be a stumbling block," adds Calabria, referring to the Obama administration's plan to cerate a Consumer Financial Protection Agency, which would have regulatory and rulemaking authority over a host of financial products, including mortgages.
Opponents on both sides of the aisle say the CFPA is unnecessary and steps on the rights of states. Republicans in the Frank's House committee mostly voted against the measure, which passed 39-28, closer than many other aspects of the wide-ranging bill.
The Senate and House versions differ in a number of key areas, including the regulatory structure for the banking industry. Dodd, for instance, would consolidate the regulatory authority of four agencies, including the Federal Reserve, into one new entity. Frank’s bill would only consolidate the activities of two agencies into one, leaving some jurisdiction to the Fed and the Federal Deposit Insurance Corporation.
Key Senate Republicans are thought to favor the less radical approach of the House bill.
The White House offered its first proposals on reform in late February, when the financial crisis was still a major threat to the economy. Since then, the need to pass major reforms has become less urgent for some in Congress.
The two versions of the bill, regardless of the Senate's final form, are likely to go through a complicated reconciliation process, wherein the two chambers have to hammer out a compromise version.
The reform process has also been complicated by something of a populist revolt in Congress against the unchecked powers of the Federal Reserve and the policies of Chairman Ben Bernanke, who used a variety of aggressive and unconventional measures to stabilize Wall Street and the financial system during the crisis.
Bernanke, who faces a Senate confirmation vote on a second term Dec. 17, along with Treasury Secretary Timothy Geithner, has become lightning rods for critics of White House intervention in the private sector, both under the Obama and Bush administrations.
House Republicans introduced a plan that would limit the Fed’s authority to monetary policy and also address the role of the government-sponsored mortgage giants Fannie Maeand Freddie Mac in the financial crisis. The House legislation on its way to the floor next week does not specifically address the future structure or role of the two entities although some of its provisions clearly apply to them.