President Obama and Senate Democrats secured an important election-year victory on Thursday with the passage of a filibuster-proof bill on sweeping reform for financial regulation.

After losing a similar vote on Wednesday, the bill managed to pass with the required 60 votes after the newest Republican to join the Senate, Scott Brown, voted across the aisle. Arlen Specter, who earlier this week lost in the Arkansas primary also added to the ranks of the bill’s supporters. The final passage of the bill is now virtually a certainty, after which it will have to be reconciled with the House version.

Hailing vote as a victory for “reform that will protect consumers, protect our economy, and hold Wall Street accountable,” Mr. Obama said it had won Senate approval despite the financial industry repeatedly attempting to kill the reform with “hordes of lobbyists and millions of dollars in ads”. When they could not kill it, they tried to water it down with special interest loopholes and carve-outs aimed at undermining real change, he added.

One of the most powerful curbs on the unrestrained power of banks coming out of this reform will be the “Volcker rule”, which restricts banks’ proprietary trading and investment in hedge funds and private equity. Also of major concern to financial lobbies has been a provision prohibiting deposit-taking institutions from trading credit-default swaps, interest-rate swaps and similar derivatives. This dimension of the reform aims to set up a firewall between retain and commercial banking on the one hand and the highly speculative trading and investment banking activities on the other.

Consumer protection

Touching on some of the key proposals of the reform Mr. Obama said the bill would create the “strongest consumer protections in history”. He said the new rules would crack down on predatory practices and unscrupulous mortgage lenders and enforce a new credit card law banning unfair rate hikes and overdraft fees and exorbitantly priced college loans.

The President also said the American people would never again be asked to foot the bill for Wall Street's mistakes. “There will be no more taxpayer-funded bailouts – period,” he said, noting that his administration had the tools to wind down failing financial institutions without endangering the broader economy.

Finally he also described the bill’s aim to bring about a fundamental restructuring of the corporate governance structure of financial institutions, making them more transparent and accountable. Mr. Obama said that complex, backroom deals that helped trigger the financial crisis would be “brought to the light of day” and shareholders would henceforth have greater say on the pay of CEOs and other executives.

Impact on Wall Street

Yet Mr. Obama was also careful to underplay the negative impact on Wall Street, arguing, “Our 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.”

He emphasised that this was not a “zero-sum game where Wall Street loses and Main Street wins”, rather a recognition of the imperative that those in Wall Street boardrooms and on trading floors be held accountable for the decisions that they make.

Speaking after the cloture vote Senate Majority Leader Harry Reid said the bill had a message for both Wall Street and Main Street. He explained, “To Wall Street, it says: no longer can you recklessly gamble away other people’s money. It says the days of ‘too big to fail’ are behind us. It says to those who game the system: the game is over.”

Mr. Reid added, “To Main Street, this bill says: you no longer have to fear that your savings, your retirement or your home are at the mercy of greedy gamblers in big banks.”

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