WASHINGTON, (Reuters) – The U.S. Senate approved a sweeping Wall Street reform bill on Thursday night, capping months of wrangling over the biggest overhaul of financial regulation since the 1930s.
By a vote of 59 to 39, the Senate awarded a victory to President Barack Obama, a champion of tighter rules for banks and capital markets after a 2007-2009 financial crisis that slammed the economy and led to massive taxpayer bailouts.
The Senate bill must now be merged with a measure approved in December by the U.S. House of Representatives. Only then could a final package go to Obama to be signed into law, something that analysts said may happen next month.
Changes proposed in both bills — driven by lawmakers eager to look tough on Wall Street ahead of mid-term congressional elections in November — threaten to constrain the banking industry and reduce its profits for years to come.
Obama said the final version of the bill will hold financial firms accountable but not stifle the free market.
“Over the last year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars in ads, and when they couldn’t kill it they tried to water it down …. Today, I think it’s fair to say these efforts have failed,” Obama said.
“We’ve still go some work to do,” he added. “The House and the Senate will have to iron out the differences between the two bills. And there’s no doubt that during that time the financial industry and their lobbyists will keep on fighting.”
On Wall Street yesterday, the Dow Jones industrial average .DJI> slid 3.6 percent, hurt by fears of Europe’s debt crisis retarding global economic recovery, but also by uncertainty over U.S. financial reform, traders said.
Barney Frank, head of a key House panel, told CNBC it was important to complete reform soon to ease uncertainty.
Frank, the Democratic author of Wall Street reform in the House, on Thursday drew an early negotiating line ahead of impending talks with the Senate on a final package.
In letters to senior Senate Democrats that were obtained by Reuters, Frank said certain House proposals on financial firm regulation and bank trading limits must be preserved.
He said the House proposals were important to his home state of Massachusetts and that “none of them threaten or weaken the broad objectives of comprehensive reform … I will insist that they be maintained in the final bill.”
The letters were addressed to Senate Democratic Leader Harry Reid and Banking Committee Chairman Christopher Dodd, the Democratic author of the Senate bill. Both will likely be key players, along with Frank, in the House-Senate talks.
In the Senate vote on the bill, four Republicans voted with the Democrats for passage: Susan Collins, Olympia Snowe, Charles Grassley and Scott Brown. Two Democrats voted against the bill: Maria Cantwell and Russ Feingold.
Democrat Arlen Specter, who lost a reelection primary on Tuesday, did not vote. Nor did Democrat Robert Byrd.
“For those who wanted to protect Wall Street, it didn’t work. They can no longer gamble away other people’s money,” Reid told reporters after the late-evening vote.
Dodd said he hoped the Senate would be able to vote to approve a final House-Senate package by July 4.
Republicans worked to delay and water down the bill over months of closed-door negotiation and open debate, arguing it was an overreach of government into the private sector.
The Senate bill “places layer upon layer of unnecessary new regulations on financial institutions that will undoubtedly have a chilling effect on the ability of American families and businesses to access credit,” said Republican Senator Judd Gregg in a statement after the vote.
Last-minute maneuvering on the Senate floor killed two controversial amendments: one to tighten proposed restrictions on risky trading by banks, and another exempting car dealers that do not finance their own lending to auto buyers from oversight by a new federal consumer watchdog.
