Before cloture was invoked by a 60-38 vote to stop debate on the bill Thursday morning, Senator Richard Shelby (R-Alabama), ranking minority member on the Senate Banking Committee, urged his fellow Republicans to "reject" what he called the "2,300-page monster."
In his remarks on the Senate floor following Shelby's remarks, Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) conceded that while the bill "was not perfect," Congress did "the best it could" in crafting a bill that was designed to mitigate disastrous results from the inevitability of another financial crisis. Dodd went on to say that passage of the bill was not the end as "oversight and consultation will be required over the years to make this [bill] work well."
After cloture was successfully invoked on the bill (Senator Michael Crapo (R-Idaho) and the late Senator Robert Byrd did not cast a vote on the bill), Senator Ted Kaufman (D-Delaware) said on the Senate floor that with this bill "regulators are being handed an enormous responsibility," and that it would be up to Congress to ensure that regulators were given the resources they need to fulfill those responsibilities.
The House and Senate missed their deadline to send the Wall Street Reform Bill to President Obama for his signature by July 4. The House sailed through a final vote on the bill's passage late Wednesday, June 30. The Senate, however, delayed taking up a final vote until it returned from recess on July 12.
Senate Democrats needed at least four Republicans to vote for the bill because the death of Senator Robert Byrd (D-West Virginia) early on June 28 left them with only 56 of the 60 votes needed to move the bill to a final vote. West Virginia's Democratic governor, Joe Manchin, has indicated that he's interested in running for the U.S. Senate if a special election is held in November. Senator Maria Cantwell (D-Washington) switched to a "yes" vote on July 1; Democrats only needed to secure the support of two Republicans to vote in favor of the bill in order to avoid procedural hurdles in the Senate. Senator Scott Brown (R-Massachusetts) decided to support the bill, as did Maine Republicans Susan Collins and Olympia Snowe. Russ Feingold (D-Wisconsin) cast a "no" vote as did Senator Chuck Grassley (R-Iowa).
Securities and Exchange Commission Chairman Mary Schapiro said just a few days before Congress returned from its July 4th recess that while the agency is committed to finalizing the many rules it has proposed over the last 18 months, she anticipates spending the next 18 months implementing the changes laid out in the reform bill, formally called the Dodd-Frank Wall Street Reform and Consumer Protection Act. She cited specifically oversight of the over-the-counter derivatives market, and conducting a study of broker/dealer and investment advisor obligations along with imposing a fiduciary standard on brokers.
"The bill calls on the SEC to study the effectiveness of existing standards of care for broker/dealers and investment advisers. We would be seeking public input and identifying legal and regulatory gaps, shortcomings or overlaps in these standards," Schapiro said in a July 9 speech before the Society of Corporate Secretaries and Governance Professionals. "The legislation also gives the SEC authority to promulgate rules that would impose a harmonized fiduciary standard on broker/dealers and investment advisers who provide personalized investment advice to retail or other customers. I have long advocated such a uniform fiduciary standard and I am pleased the legislation would provide us with the rulemaking authority necessary to implement it."
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 Wall Street 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.
Besides establishing a Consumer Financial Protection Bureau (CFPB), a Financial Stability Oversight Council, a Federal Insurance Office in the Treasury Department, an Office of Credit Ratings at the Securities and Exchange Commission (SEC), the reform bill includes a number of changes for the SEC. While Schapiro got the authority that she was seeking to put brokers under the same fiduciary standard of care as investment advisors, the devil is in the details as to exactly how this will take shape.
Schapiro, however, was not granted her request to allow the SEC to be self-funded. Industry observers and even a former SEC Chairman worry that, once again, Congress has left the SEC with inadequate resources by not granting self-funding. "I believe the SEC will not receive adequate funding," former SEC Chairman Harvey Pitt told Investment Advisor in an e-mail message. "Usually, in the face of a crisis of this sort, there is an uptick in SEC funding, but it doesn't last long. As a result of the deletion [of self-funding], the SEC is now, once again, a step-child financial regulator," said Pitt, who's now CEO of Kalorama Partners in Washington.
Kristina Fausti, director of regulatory and legislative affairs for fi360, says that the final conference bill retains the SEC funding appropriations that were set out in the House bill, "and form a baseline of appropriations for the SEC for fiscal years 2011-2015." So this means that the SEC's "budgeted appropriations would double within the next five years as was the case under the House version of the bill. In addition to this funding, the SEC would also have a 'reserve fund' established in the Treasury, and money for this fund would come from fees collected by the SEC for the registration of securities," she explains.
For each fiscal year, Fausti continues, "the SEC may deposit no more than $50 million into the reserve fund; and the SEC may use no more than $100 million from the fund in any single fiscal year. It appears as though the SEC may use its own discretion as to how to use money from the reserve funds, subject to the $100 million spending limit, but would be required to report to Congress the date, amount, and purpose of any uses of the money from the fund."
While the positive in the funding that was granted "is that the SEC would have the ability to better budget and plan its resources over the next five years," Fausti says, "it is still unclear whether the amount of appropriations will be sufficient for the Commission to accomplish all of its functions, especially given the new authority it is expected to gain and additional studies, reports, and rulemaking it must complete to respond to the new legislation." What's more, "while the SEC would be able to tap into additional funds from the reserve fund, the limitations on the funding and use of money from the fund could cause a serious impediment for the SEC in times of economic and regulatory crisis. Not to mention the fact that the SEC would be required to forfeit funds to the Treasury that are above the $50 million a year funding limit."
To see how the securities and brokerage industry is pondering compliance with the reform bill, follow Wealth Manager's Kate McBride's tweets from the SIFMA conference.