Republicans fight Democrats on Wall Street reform

All 41 Republican senators block the Democrats from bringing a reform bill to the Senate floor.

By Kim Peterson Apr 16, 2010 3:23PM
Washington, D.C. © Bilderbuch/Design Pics/CorbisJust when lawmakers were starting to recover from the health care battle, along comes another hot-button issue: Wall Street reform.

Democrats have been working on legislation that attempts to more tightly control the financial industry -- hoping to avoid the reckless behavior that helped bring about the mortgage-fueled crisis of the last two years.

Now, all 41 Republicans in the Senate are united in blocking the Democrats from bringing the legislation to the Senate floor. Sen. Harry Reid had planned to bring the bill for debate and to add amendments, The Huffington Post reports.

This is a tough spot for Republicans to be in, and clearly they are not as united in their opposition as they were to health care reform.

They don't want to be seen as siding with big banks -- particularly now as voter anger is clearly directed at Wall Street. In fact, eight Republicans may end up breaking ranks to side with Democrats, Politico reports. Democrats need at least one Republican vote.

The New York Times also identifies a "sign of the internal discord" among Republicans: A letter Senate Republicans sent to Reid doesn't threaten a filibuster to block the bill.

Many of the Republicans say the bill would only make it easier to bail out Wall Street firms in the future. A smaller group of them, however, say it will prevent such bailouts in the future, the Times reports.

One point of contention is a $50 billion fund -- from bank taxes -- that would help pay for failing banks, the Times reports. Republican leaders say that just having that fund around will encourage banks to take more risks.

But Democrats say the fund would be used to shut down failing banks, and that banks -- not taxpayers -- should pay into the fund.

A couple of recent events are working in the Democrats' favor on this issue. First are the civil charges the Securities and Exchange Commission filed against Goldman Sachs (GS) Friday. (And if you think the timing on that was coincidental, well, I've got a nice mortgage-backed CDO to sell you).

Second was the recent news that Senate Republican leader Mitch McConnell met with 25 Wall Street execs to hear their criticisms of the legislation.

He was accompanied to the meeting by a top fund-raiser for Republican Senate candidates. The gathering "was undeniably political," reports none other than Fox News' business site.

So for now, the main action on Wall Street reform seems to be inaction. It'll be interesting to see how things change as the Senate digests the Goldman Sachs news.

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