House Democrats head into the final stretch on a long-awaited Wall Street regulation bill with two crucial and contentious votes looming before they can declare victory on one of President Barack Obama’s legislative priorities.
The sweeping regulatory overhaul aims to address the myriad conditions that led to last year’s financial crisis.
Test votes during two days of debate indicate that Democratic support for the underlying legislation will hold in final passage. Prodded by moderates, however, nearly half the Democrats teamed up with Republicans late Thursday to loosen restrictions on derivatives and reject tougher regulations.
Before a final vote Friday, House members will have to decide whether to support an amendment to kill a proposed Consumer Financial Protection Agency, one of the central features of the legislation. The agency would consolidate consumer lending regulations and enforcement that is now split among several banking regulators.
Eliminating the consumer agency could cost the overall bill support from liberals.
Democratic leaders were also seeking to revive legislation that would let bankruptcy judges rewrite mortgages to lower homeowners’ monthly payments. A coalition of banking organizations on Thursday sent lawmakers a letter urging them to vote against the amendment. The House previously passed bankruptcy-mortgage legislation, but it failed in the Senate.
House Speaker Nancy Pelosi applauded progress on the bill Thursday.
“American families will no longer be at the mercy of the Wall Street in terms of their jobs, their homes, their pension security, the education of their children,” said Pelosi, D-Calif.
Later that evening, scores of Democrats strayed and voted with Republicans on amendments that eroded the reach of proposed regulations on complex derivatives trades.
Democratic attempts to toughen the legislation failed.
Though not major setbacks, the votes illustrated the difficulties facing House Financial Services Committee Chairman Barney Frank and the Obama administration as they seek to pass the most ambitious rewrite of financial regulations since the New Deal.
The U.S. Chamber of Commerce has been an aggressive opponent of the legislation, running television ads against the proposed consumer agency and pressuring lawmakers to vote to eliminate it and to ease the derivatives regulations.
The legislation still imposes restrictions on derivatives, aiming to prevent manipulation in and bring transparency to a $600 trillion global market. An amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, exempted businesses that trade in derivatives, not as financial speculators, but to hedge against market fluctuations such as currency rates or gasoline prices. The amendment also provided an exception for businesses that are not considered too big to be a risk to the financial system.
A Democratic effort to make more companies subject to derivatives regulation failed 279-150.
For Democrats, the votes split along turf lines. All but a few of the Democrats on the House Agriculture Committee voted for the broader exception. The Agriculture Committee oversees commodities trading and had recommended less restrictive derivatives rules, but the final bill did not include them.
On Wednesday, pro-business Democrats succeeded in making it harder for states to enforce their own consumer protection rules on national banks. Under a compromise struck with Democratic leaders and Treasury officials, states would not be able to pre-empt federal consumer laws if the state law “materially” interferes with the business of banks.
The bill is H.R.4173.
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