Senate poised to pass historic financial reform

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By David Lightman | McClatchy Newspapers

WASHINGTON _ The Senate on Monday was poised to end its deadlock and approve a historic overhaul of the nation's financial regulatory system as two Republicans said they expect to support the legislation.

Sens. Olympia Snowe, R-Maine, and Scott Brown, R-Mass., said Monday they would join Sen. Susan Collins, R-Maine, and nearly all Democrats in voting for the bill.

Majority leader Harry Reid, D-Nevada, said he expects a vote this week, and since Democrats control 58 of the Senate's 100 seats—and one Democrat has expressed serious concerns with the bill-- supporters now believe they should have the 60 votes needed to cut off extended debate and pass the measure.

"While not perfect," Snowe said in a statement late Monday, "the legislation takes necessary steps to implement meaningful regulatory reforms, create strong consumer protections, and restore confidence in the American financial system."

Snowe's decision was not a surprise; she has voted with Democrats on several key issues recently.

Brown's decision was politically tougher, as he faced enormous political heat back home.

Activists held an event Monday near the Boston Marathon finish line in Copley Square prior to Brown's midday announcement to urge him to vote yes. After he said he would, Lizzi Weyant, an attorney for MASSPIRG, a public interest group, called Monday "a proud day for the Bay State."

In a statement, Brown said he appreciated efforts to improve the bill. "As a result, it is a better bill than it was when this whole process started. While it isn't perfect, I expect to support the bill when it comes up for a vote," Brown said. "It includes safeguards to help prevent another financial meltdown, ensures that consumers are protected, and it is paid for without new taxes."

At stake is legislation addressing many of the problems that led to the financial industry's 2008 collapse. The House of Representatives passed the bill last month.

The measure, the product of painstaking negotiations _ largely among Democrats _ would set up a new consumer agency to write rules for credit products such as mortgages, student loans and credit cards. It would require financial institutions to spin off some riskier investments and gives the government tough new tools to deal with large, ailing institutions.

The path to the right math for the bill's passage has been long and winding. In May, Brown, Collins, Snowe and Charles Grassley, R-Iowa, sided with Democrats on a similar version of the legislation. Two Democrats, Wisconsin's Russell Feingold and Washington's Maria Cantwell, were opposed.

Cantwell has since said she will vote yes, because the new bill gives regulators tougher tools to use to crack down on the derivatives market. Feingold continues to have serious concerns.

Collins, pleased that the bill strengthened capital requirements for large institutions, said she was "inclined to support" the bill, but Grassley would not comment Monday.

Brown has agonized the most over the decision. In January he became the first Republican to win a Massachusetts U.S. Senate seat in 38 years, but he faces re-election in 2012 and needs to woo independents and Democrats, who make up much of the state's electorate. He starts from a strong political position. A University of New Hampshire Survey Center Massachusetts poll June 17 to 23 found he was viewed favorably by 55 percent of state residents, slightly higher than veteran Sen. John Kerry, D-Mass., and Obama.

Brown drew support from across the political spectrum—41 percent of Democrats, 55 percent of independents and 79 percent of Republicans saw him favorably.

Stretching out his financial regulation decision probably helps his image, said Thomas Whalen, associate professor of social science at Boston University.

"This helps him say, 'Look how powerful I am. The power brokers have to come to me,''' Whalen said.

In some ways, they have. First, he influenced a House and Senate compromise to water down what would have been sharp restrictions on what banks could invest in if they also invested on behalf of clients.

Brown balked when he saw that House-Senate negotiators add $19 billion in taxes on large banks and hedge funds to offset new spending in the massive bill. "My fear is that these costs would be passed on to consumers in the form of higher bank, ATM and credit card fees," he said, "and put a strain on lending at the worst possible time for our country."

The negotiators rewrote that passage and cut out the tax, getting the revenue instead from the 2008 bank bailout and a slight increase in bank fees paid to the Federal Deposit Insurance Corp.

Brown got nearly $1.1 million from the finance, insurance and real estate sectors for his Senate campaign, more than any other interest group contributed, according to the nonpartisan Center for Responsive Politics, a research group.

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