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Obama, Bank Lobbyists React to Passed Senate Bill

In a major step toward passage of finance reform legislation, late yesterday the Senate passed its 1,566-page version of Wall Street/bank reform. The House and Senate still have to reconcile their two versions of this legislation before it can be enacted, but it seems likely this work will be completed well before the fall elections. Broad measures in the Senate version

In a major step toward passage of finance reform legislation, late yesterday the Senate passed its 1,566-page version of Wall Street/bank reform. The House and Senate still have to reconcile their two versions of this legislation before it can be enacted, but it seems likely this work will be completed well before the fall elections. Broad measures in the Senate version include new derivatives rules, provision for a consumer financial protection agency, tougher restrictions on debit and credit card fees (including interchange fees), establishment of a Financial Stability Oversight Council, limits on banks' proprietary trading operations, increased capital requirements for banks of all sizes, a requirement that hedge funds register with the SEC and an authorization to the FDIC to unwind large, troubled banks.President Obama praised the Senate bill in a speech yesterday. He said Washington's goal "is not to punish the banks, but to protect the larger economy and the American people from the kind of upheavals that we've seen in the past few years. And today's action was a major step forward in achieving that goal."

The President had harsh words for bank lobbyists: "Over the last year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars in ads. And when they couldn't kill it, they tried to water it down with special interest loopholes and carve-outs aimed at undermining real change. Today, I think it's fair to say that these efforts have failed."

Obama said the bill will end big-bank bailouts. "The American people will never again be asked to foot the bill for Wall Street's mistakes," he said. "There will be no more taxpayer-funded bailouts - period. If a large financial institution should ever fail, we will have the tools to wind it down without endangering the broader economy. And there will be new rules to prevent financial institutions from becoming 'too big to fail' in the first place, so that we don't have another AIG."

Bank lobbying groups sent mixed messages about the Senate's action.

The Independent Community Bankers of America supports the clauses that require large banks to pay higher premiums to the FDIC, but has "grave concerns" about the proposed Consumer Financial Protection Bureau. "Community banks have always viewed consumer protection as a cornerstone to their business model, so it makes sense that the CFPB focus on those too-big-to-fail and shadow institutions that were at the heart of the financial crisis," the group said in a statement. The association also objects to the credit and debit card interchange fee reduction and increased capital requirements for banks.

The American Bankers Association said it opposes the Senate bill "because it now contains very negative provisions that will ultimately hurt American consumers, small businesses and the broader economy," according to a statement from president Edward Yingling. It did not specify in the statement which provisions it objects to.

The ABA said it does support some elements of the bill, including the creation of a systemic risk council, creation of a strong mechanism for handling the failure of large institutions, ending the concept of too-big-to-fail, closing gaps in regulation and enhancing consumer protection.

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