One of the most far-reaching reform packages targeting the basic landscape of Wall Street regulation failed to clear the Senate on Wednesday — and in its wake revealed fault lines within the Democratic caucus of the Upper House of the United States Congress.
The reform proposal, which Senator Chris Dodd of the Banking Committee cobbled together and pushed through to the floor of the Senate for debate, fell flat after a motion to conclude the debate saw 42 Senators voting “no”.
The naysayers included Democratic Senators Maria Cantwell and Russ Feingold, both of whom joined with the 39-strong Republican opposition on the grounds that the reforms did not go far enough to improve the transparency of derivatives trading.
In a press release Senator Cantwell said, “Even something like the Hoover Dam, with all the great concrete and all the great engineering … still has a problem if somebody drills a hole in the bottom of it.”
Her principal objection was that the reforms did not require traded derivatives to be first cleared at an exchange. She said, “If we don’t bring derivatives onto the same kind of mechanisms we have for other products in the financial markets… then I don’t know what we’re doing out here in the context of what brought us into this crisis.”
According to reports both Senators Cantwell and Feingold joined with Republican Senator John McCain to press for the restoration of the Glass-Steagall Act, which would create a firewall between commercial and investment banking arms of financial institutions.
While the supporters of the bill were joined by two Republican Senators voting “aye”, they also lost one crucial vote from Senator Arlen Specter, who was absent after his defeat in the Pennsylvania primary on Tuesday evening.
In a procedural manoeuvre that would keep open a window to call for another vote in the future Senate majority leader Harry Reid also voted “no”, bringing the “ayes” to 57.
The vote was followed by bitter partisan accusations of the tenor witnessed during the healthcare debate, with both parties accusing the other of deliberate manipulations or obstructionism.
