Senate passes sweeping bank reform bill

The Senate on Thursday cleared the last hurdles to passing a sweeping Wall Street reform bill, handing President Obama a victory even as a new financial crisis swept U.S. and global markets.

Mr. Obama took to the Rose Garden to hail the break in the Senate’s four-week logjam only minutes after the Dow Jones Industrial Average plummeted by 376 points, or nearly 4 percent, to 10,068, in the stock market’s latest fraught reaction to a burgeoning European debt crisis.

The Senate bill, which draws heavily from Mr. Obama’s regulatory blueprint for Wall Street, aims to prevent a repeat of the 2008 financial crisis that threw the U.S. and world economies into the deepest recession since the Great Depression.

It was the government reaction to that earlier crisis - launching a massive, worldwide splurge on spending to resuscitate the global economy and rescue the failing banking system - that brought on the latest crisis, which started in Greece and a handful of other European countries with heavy debt loads.

Mr. Obama, in his celebratory remarks, did not mention the debacle rocking Wall Street and other markets from London to Hong Kong, prompting the worst one-day plunge in the Dow since last year’s market downturn.

Instead, the president once again lambasted Wall Street for trying to stop the reform bill while reveling in the congressional victory at the other end of Pennsylvania Avenue where Senate Democratic leaders succeeded in enlisting the support of an additional Republican to put his reform bill over the top.

“The recession we’re emerging from was primarily caused by a lack of responsibility and accountability from Wall Street to Washington,” Mr. Obama said. “That’s why I made passage of Wall Street reform one of my top priorities, so that a crisis like this does not happen again.”

In pushing the bill through weeks of Senate debate, Democratic leaders fended off most major changes sought by Republicans and liberal Democrats. They were joined by three Republicans in a 60-40 vote Thursday to end debate on the bill and proceed to a final vote.

The Senate’s newest member - Sen. Scott Brown, Massachusetts Republican, who had promised to work with Democrats to enact legislation - provided the critical final vote needed to break a Republican-led filibuster against the bill.

Two other Northeast Republicans - Sens. Olympia J. Snowe and Susan Collins of Maine - already had voted for the legislation.

Also helping to reverse a temporary setback to the bill in a close vote Wednesday, Sen. Arlen Specter, Pennsylvania Democrat, returned to the Senate after a devastating primary election defeat to contribute his support on Thursday.

Two liberal Democrats - Sen. Maria Cantwell of Washington and Sen. Russ Feingold of Wisconsin - continued to boycott the measure along with a nearly unified Republican caucus.

While they disagreed sharply on the merits of the bill, Democrats and Republicans agreed that the mostly cordial Senate debate considering dozens of amendments from all quarters was a welcome departure from the partisan acrimony that prevailed during the health care debate last year.

“It’s been hard to get to this point, but this has been a good debate,” said Senate Majority Leader Harry Reid, Nevada Democrat. “Maybe this is setting a good tone for the future.”

The Senate’s work on the bill likely was expedited by the worsening downturn in global financial markets sparked by Europe’s debt problems, including a “flash crash” of nearly 1,000 points in the Dow on May 6 that brought back memories of the crushing market crisis of 2008.

The market downswing has been no rival for the earlier nearly 50 percent collapse in market value, although as of Thursday it did qualify as an official market “correction” of 10 percent or more.

The blue-chip Standard & Poor’s 500 Index, the measure watched most closely by Wall Street professionals, was down by nearly 12 percent from a high of 1,217 set less than a month ago. The Dow is down by nearly 1,000 points from its high over 11,000 set last month.

European markets have fared even worse, and the once high-flying euro currency in a matter of weeks has plunged to a four-year low against the U.S. dollar and nine-year low against the Japanese yen.

Helping to trigger Thursday’s market rout was a report from the U.S. Labor Department showing a 25,000 jump in first-time claims for unemployment benefits - the largest in three months. Investors are particularly sensitive to any sign of a setback in the U.S. job market that could thwart the U.S. recovery.

Also heralding a possible weakening of the U.S. economy in the wake of the European crisis, the Conference Board said its index of leading indicators slipped in April - the first drop in more than a year.

Federal Reserve Governor Daniel Tarullo added to the market’s worries by warning that the European crisis could pose “a potentially serious setback” to the U.S. economy, which had been showing signs of strength before the crisis.

“Although we view such a development as unlikely, the swoon in global financial market earlier this month suggests it is not out of the question,” he told a House subcommittee.

The drama on Wall Street was the backdrop for the equally riveting theater on Capitol Hill, where weeks of plodding and sometimes tedious work on the financial bill gave way to a relatively speedy series of final Senate votes on the measure.

Republicans mostly acknowledged that the bill was destined to become law even as they continued to raise major objections to it.

Sen. Bob Corker, a Tennessee Republican who helped write a section of the bill to enable the government to take over and close giant financial institutions that reach the point of insolvency, lamented that despite some good provisions he could not support the bill.

The bill does not even address the severe deterioration in lending standards and “easy money” mortgage loans that was the “genesis of the crisis,” he said. The Senate rejected an amendment he offered to set minimum loan standards such as requiring proof of income and at least a 5 percent down payment on mortgages.

Moreover, even the procedures the bill establishes for the Federal Deposit Insurance Corp. to take over and break up giant banks previously considered “too big to fail” will allow some firms to continue operating under the government’s umbrella for as long as five years, Mr. Corker said.

While not dealing with key issues that led directly to the 2008 crisis, the bill includes dozens of items that are barely related to the crisis, he said, including a revision of the rules for proxy voting on corporate boards of directors long sought by labor unions and environmental groups.

“Proxy access has absolutely nothing - zero - to do with the crisis, but this has become a Christmas tree” for passing items sought by Democratic interest groups, Mr. Corker said.