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Where the financial reform bill goes from here

From Ed Hornick, CNN
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Dems' plan for financial reform
STORY HIGHLIGHTS
  • NEW: Senate Republicans stop debate on the financial reform bill
  • Republicans say more time is needed to craft bipartisan agreement
  • The House passed its version of the bill in December 2009
  • Current version of bill would create a Consumer Financial Protection Bureau
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Washington (CNN) -- Senate Republicans succeeded in blocking debate on a Wall Street reform bill pushed by President Obama and Democrats.

The vote means that senators will continue closed-door negotiations on two proposals passed by Senate committees to be merged into a one bill.

Democrats needed 60 votes to pass the measure, including at least one Republican vote in addition to the 59 votes in the Democratic caucus.

The final vote tally of 57-41 included two Democrats who voted against the motion. One was Senate Majority Leader Harry Reid, D-Nevada, who voted "no" for procedural reasons to ensure he could bring the motion up for reconsideration later.

The other Democrat to oppose the measure, Sen. Ben Nelson of Nebraska, said he did so because there was no final bill to be debated.

Two Republicans were not present for the vote.

Here are some frequently asked questions about that financial reform and where it's headed:

How'd we get here?

Calls for an overhaul of the financial system grew at a fever pitch after the financial meltdown on Wall Street in 2008, which caused the recession that started in late 2007 to worsen considerably.

The Bush administration initiated the Troubled Asset Relief Program, later passed by Congress, in which the government bought declining assets and stock from banks and other financial firms to shore up the beleaguered industry.

The House later began working on a financial reform bill to institute greater regulation of Wall Street, place greater protections for consumers and possibly prevent another financial crisis.

The bill, which passed in a 223-202 vote in December, saw no Republican support; 27 Democrats voted against it.

What happened in the Senate?

Senate committees took up the legislation after the House passed its version.

The bill was first approved by the Senate's Banking Committee under the leadership of Chairman Chris Dodd, D-Connecticut. Dodd and Sen. Richard Shelby, R-Alabama, spent months negotiating on the bill, though talks broke down when Dodd held a vote.

The legislation passed with no Republican support.

And then last week, the Senate Agriculture Committee also passed a measure to tighten regulations on the complex system of trades known as derivatives.

Read more on the Senate negotiations

Republicans signaled they were not yet ready to begin debate and that more needed to be worked out.

There's broad bipartisan agreement, however, to block future bailouts, increase capital cushions at banks, protect consumers and shine a light on complex financial contracts now traded in the shadows.

But Democrats and Republicans disagree about several issues, ranging from how to prevent bailouts to how to empower a new consumer regulator.

Read more on some of the disagreements

What's in it for me?

One of the key aspects of the bill would directly address consumers' needs.

The bill would create a Consumer Financial Protection Bureau, which would help protect you from abusive practices from lenders, mortgage companies and credit card folks, among others.

The regulator could ban penalty fees when high-interest mortgages are paid off early. It could let you take credit card disputes to court rather than be forced into mediation. And it could start a financial literacy drive to warn seniors about financial fraud and teach veterans how to shop for the best auto loan.

Critics argue that if the consumer regulator's rules are too tough and cut too deeply into banks' balance sheets, the banks could become unstable and insolvent.

The reform bill would also help investors and try to protect the economy from another financial crisis like the one that happened in 2008, in which the government eventually had to bail out failing banks, insurance companies and other financial firms.

The goal now is to set up an orderly process to unwind or liquidate some of these companies so no company would be "too big to fail."

The problem, Republicans say, is there are too many loopholes and that the goal is to make sure that taxpayers aren't on the hook anymore.

Where Obama stands on the issue

In a speech in New York last week, President Obama called on Wall Street to support new regulatory reforms or risk repeating the "failure of responsibility" that nearly brought down the nation's economy.

Obama said the lesson of the financial crisis, which sparked a deep recession that claimed more than 8 million jobs, is that reform is needed to prevent repeating the same mistakes.

Without reform, Obama said, "our house will continue to sit on shifting sands, leaving our families, businesses and the global economy vulnerable to future crises."

While he's sure many of the lobbyists working to defeat the measure are acting on behalf of the Wall Street firms represented by members of the audience, Obama sought to convince them that regulatory reform will benefit the industry, as well as the nation.

CNN's Dana Bash and CNNMoney.com's Ben Rooney contributed to this report.