In Reform Bill, Congress Will Miss Obama's July 4 Deadline

Senate forced to delay vote on bill until July 12 at earliest

The House and Senate will miss their deadline to send the financial services reform bill to President Obama for his signature by July 4. The House was scheduled to sail through a final vote on the bill's passage late Wednesday, June 30. The Senate, however, has delayed taking up a final vote until it returns from recess on July 12.

Democratic negotiators on the bill had to briefly reopen the conference negotiations on June 29 after Senator Scott Brown (R-Massachusetts) said he would vote against the financial services reform bill unless a $19 billion tax on big banks that was inserted during the conference committee debate was deleted. Democratic negotiators conceded and removed late on June 29 the $19 billion tax that was designed to help fund the bill and instead opted to fund the Wall Street reform bill by ending the Troubled Asset Relief Program (TARP) and by charging an extra premium to large banks by the Federal Deposit Insurance Corp. (FDIC). "We end the TARP program immediately," Senate Banking Committee Chairman Christopher Dodd said June 30 on the Senate floor.

But Washington, D.C.-based think-tank Concept Capital says that the new funding option for the bill "is worse for the big banks than the original [$19 billion tax] proposal as it excludes hedge funds, which means the industry bears the full brunt of the cost." In addition, Concept Capital analysts say, "this leaves the door open for the Administration to come back with its original--and much bigger--bank tax. That tax could cost the banks about $10 billion a year compared to the original $4 billion assessment." The banks that will be hit the hardest, the analysts say, are those "with between $10 billion and $50 billion of assets as they were exempt from the reform assessments but are covered by the higher FDIC premiums."

Senate Democrats need at least four Republicans to vote for the bill because the death of Senator Robert Byrd (D-West Virginia) in early June 28 left them with only 56 of the 60 votes needed to pass the bill. Two Democrats, Senators Maria Cantwell (D-Washington), and Russ Feingold (D-Wisconsin), are adamant about voting against the reform bill. It remains to be seen if the revised bill will win the votes of Sens. Scott Brown and Maine Republicans Susan Collins and Olympia Snowe.

But Concept Capital analysts say they believe that the new funding deal excluding the $19 billion tax on big banks "helps solidify at least three more votes. That means Democrats will have 60 votes once the West Virginia governor names a temporary replacement for the late Senator Byrd."

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