Congress pushed through a handful of amendments yesterday afternoon that are now tacked on to the financial regulatory reform bill sponsored by Sen Christopher Dodd (D-CT), currently working its way through the Senate. The Senate resumed consideration of the bill, S 3217 or the Restoring American Financial Stability Act, this week after Senate Republicans blocked for several days debate of the legislation in an effort to encourage a stricter version of the bill when it comes to putting an end to taxpayer-funded bailouts of the financial system. The Senate approved a bipartisan amendment co-sponsored by Dodd and Sen Richard Shelby (R-AL), by a 93-5 vote yesterday. Four Republicans and one Democrat voted against the amendment, which aims to prevent any financial firm from becoming “too big to fail”. The amendment provides an “orderly liquidation mechanism” for the Federal Deposit Insurance Corp. (FDIC) to unwind failing financial firms, according to a statement by Dodd. It allows for shareholders and unsecured creditors to bear losses on failed firms and gives regulators the authority to break up a company if it poses “a grave threat” to the broader financial system. Additionally, large bank holding companies that received bailout funds will not be allowed to avoid Federal supervision “by simply dropping their banks,” Dodd said. The bill will continue to eliminate the ability of the Federal Reserve to prop up failed firms like American International Group (AIG), and most financial firms will still be resolved through bankruptcy. The amendment eliminates a $50bn bailout fund sometimes called “the honey pot,” according to a statement by Shelby from the Senate floor yesterday. “It would significantly tighten up language in the bill dealing with the Federal Reserve’s ability to provide liquidity to the financial system in times of severe market distress,” he said. “And it requires the approval of the Treasury secretary before the Federal Reserve can undertake any emergency lending.” The overwhelming vote on the amendment is already being hailed as the beginning of bipartisan cooperation on bringing the reform legislation. “We welcome today’s action by the Senate to approve the Shelby-Dodd amendment and commend Chairman Dodd and Senator Shelby for their leadership,” Treasury Department secretary Timothy Geithner said in a statement following the vote. “The strong bipartisan support for this provision demonstrates the growing momentum for passing comprehensive financial reform.” The Senate also passed by a 96-1 vote an amendment sponsored by Sen Barbara Boxer (D-CA) that would “prohibit taxpayers from ever having to bail out the financial sector.” A single Republican voted against the amendment. The Senate also approved by voice vote an amendment sponsored by Sen Olympia Snowe (R-Maine) that would “provide for consideration of seasonal income in mortgage loans.” For example, Snow has been reported as raising concerns about loans for seasonal lobster industry in her state. Part of the credit funding that particular industry takes the form of home equity lines of credit that allow for smaller monthly payments during the off-season — products that she has said could be interpreted as “deceptive” under the broad financial reform bill. Write to Diana Golobay.
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