WASHINGTON BUREAU — Members of the Senate have voted 59-39 to pass the financial services bill formerly known as S. 3217, the Restoring American Financial Stability Act.
The bill, now known as H.R. 4173, the Wall Street Reform and Consumer Protection Act — the same name and bill number given to the financial services bill that the House passed in December 2009 — needed to attract a majority of the votes cast to pass.
HOW THE SENATE VERSION OF H.R. 4173 PASSED
The Republicans who ended up voting for the bill were Scott Brown of Massachusetts and Sus an Collins and Olympia Snowe of Maine.
The Democrats who voted against the bill were Maria Cantwell of Washington and Russell Feingold of Wisconsin. Cantwell and Feingold say the final version of the bill would do too little to prevent the kind of financial crisis that hit the world in September 2008.
Sen. Arlen Specter, D-Pa., and Sen. Robert Byrd, D-W.Va., did not vote on final passage.
Earlier in the day, H.R. 4173 backers had to hold a vote on a cloture motion, or effort to avert a filibuster by putting a limit on debate. Bill supporters needed 60 votes to pass the cloture motion, and the vote on that motion was exactly 60-40.
During an earlier cloture motion vote, held Wednesday, the cloture motion failed 57-41. Senate Majority Harry Reid, R-Nev., voted against the bill for parliamentary reasons, to have the standing to ask for the vote to be reconsidered. Specter was absent, and Brown voted against cloture.
Specter and Brown today voted for cloture.
H.R. 4173: THE NEXT STEP
Immediately after the vote, members of the Senate agreed to send a message to the House asking for a conference to reconcile the two different versions of the bill.
An insurance industry lobbyist had speculated that the House and Senate might use an informal process to come up with the final version of the bill, but it now appears that there will be a formal reconciliation conference. The Senate will hold at least two roll call votes Monday on motions regarding the instructions that the Senate will give the Senate conferees, according to Senate Democrats.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has said that he hopes work on a final bill will be completed by June 30.
“The two bills are very similar, and the House is ready to go to conference to work out the remaining issues,” Frank said in a statement shortly after the Senate passed its bill. ” I am confident that we can have a bill ready for President Obama’s signature very soon.”
WHAT’S IN THE SENATE’S H.R. 4173
The Senate version of H.R. 4173 would require the SEC to study the idea of requiring all who provide investment advice, including broker-dealers and life insurance agents who are licensed to sell securities, to abide by a fiduciary standard, then report back to Congress in 18 months.
Today, financial planners and other investment advisors already abide by a fiduciary standard, which requires that the advisors serve customers without having any conflicts of interest. Broker-dealers, including many life producers, use a suitability standard, which requires only that the verify that a product sold to a consumer suits the needs of the consumer.
The final version of H.R. 4173 would give the SEC the authority to develop new rules based on its fiduciary standard study findings.
Financial planners, consumer groups and many members of Congress have been supporting the idea of creating a universal fiduciary standard.
The Consumer Federation of America, Washington, blasted the lack of a universal fiduciary standard requirement. “We are deeply disappointed that the bill does nothing to ensure that brokers have to put their customers’ interests ahead of their own when they give investment advice,” said Barbara Roper, director of investment protection at the CFA.
Another provision in the Senate version of H.R. 4173 would impose restrictions on the proprietary trading activities of banks, but it apparently would impose much looser limits on the proprietary trading activities of insurers.
The restrictions are based on the “Volcker rule” proposal. Former Federal Reserve Chairman Paul Volcker wants to limit federally insured banks’ ability to engage in proprietary trading, because of a concern that access to federal support encourages bankers to take on too much risk.
Massachusetts Mutual Life Insurance Company, Springfield, Mass., and other Massachusetts financial services companies apparently persuaded Brown that strict limits on insurers’ proprietary trading activities would be too onerous. Congress watchers say Brown worked through Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, to win concessions on the proprietary trading provision both from Reid and from Sen. Christopher Dodd, D-Conn., who oversaw the drafting of the Senate financial services bill.
The Senate version of H.R. 4173 also would:
- Give the Federal Reserve Board the authority to regulate large insurers and other large financial institutions that are not banks.
- Create an Office of National Insurance within the Treasury Department. The ONI would compile data on insurance companies and the insurance industry, and it would have the authority to reconcile state insurance laws with the provisions in international trade agreements.
- Give regulators in the state of domicile of a reinsurer or surplus lines carrier the authority to govern that reinsurer or surplus lines carrier.
- Revamp the rules governing the credit rating agencies.
- Change the rules governing swaps and other derivatives.