The Senate on Thursday began debate on Democrats’ financial overhaul bill, including a provision to create the first formal regulatory structure for the $605 trillion over-the-counter derivatives market.
Senate Republicans on Wednesday agreed to let debate begin on the legislation, which is based on a proposal from President Barack Obama to strengthen oversight of Wall Street.
“The status quo, as we all know, is unacceptable,” the bill’s author, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said as debate began. “We cannot leave the American people vulnerable to the present construct of our financial regulatory system.”
Democrats agreed to change a section of the bill aimed at preventing future bailouts of Wall Street banks similar to the $700 billion bailout Congress approved in 2008 for firms including Citigroup and American International Group. Before that change, Republicans had blocked debate on the measure in three procedural votes earlier this week.
Mr. Dodd said the Senate would consider an amendment offered by Sen. Barbara Boxer, D-Calif., to require that no taxpayer funds be used to disassemble a failed company.
Sen. Richard Shelby, R-Ala., ranking Republican on the Senate Banking Committee, on Wednesday broke off talks with Mr. Dodd aimed at crafting a bipartisan compromise and said he would “seek to remove dozens of provisions that unnecessarily expand the reach of the federal government into the private affairs of Americans.”
The legislation would ban proprietary trading at U.S. banks, strengthen oversight of hedge funds and create a council of regulators to monitor the economy for systemic risk.