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Senators say a bipartisan Wall Street measure is close

Democrats try to win Maine GOP votes

Republican Richard Shelby said issues to be resolved include a proposed consumer protection bureau at the Federal Reserve. Republican Richard Shelby said issues to be resolved include a proposed consumer protection bureau at the Federal Reserve.
By Alison Vekshin
Bloomberg News / April 21, 2010

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WASHINGTON — Republican Senator Richard Shelby said he and Banking Committee chairman Christopher Dodd are close to reaching an agreement in the Senate on a bill to overhaul the regulation of Wall Street.

“We’re making progress; I believe that we’re going to get us a bipartisan bill,’’ said Shelby, an Alabama Republican who is the committee’s ranking minority-party member.

Dodd, a Connecticut Democrat, said in a speech that he and Shelby are 80 to 90 percent in agreement.

A deal would probably ensure passage of a bill. Last week, all 41 Senate Republicans pledged to oppose the measure that Dodd’s panel passed last month.

Republicans, led by Senate minority leader Mitch McConnell of Kentucky, have criticized a provision that would give the government authority to take apart large financial firms that are failing, using a $50 billion industry-supported fund. Republicans say the provision would create a permanent taxpayer-funded bailout. Democrats say the fund would be used to dismantle firms, not rescue them.

Senate majority leader Harry Reid, a Nevada Democrat, said he expects to bring the measure to the floor this week or next, adding that Democrats might drop the fund.

President Obama is also talking with senators about removing the fund, spokesman Bill Burton said, adding that Dodd’s bill is strong and predicting bipartisan support.

Obama won’t “water down the legislation just to be able to call it bipartisan,’’ Burton said.

Shelby said the other issues he and Dodd must resolve include a proposed consumer protection bureau that would be housed at the Federal Reserve and a provision to strengthen the oversight of derivatives.

Senators on both sides have held out hope that a bipartisan majority could materialize. But in the short term, to overcome a possible GOP filibuster against bringing the measure to the Senate floor, Democrats are targeting three Republicans: Olympia Snowe and Susan Collins of Maine and Bob Corker of Tennessee. They have said they oppose the bill in its current form, but Snowe and Corker have said their concerns could be resolved.

The Obama administration intensified its attempt to corral their votes, with Treasury Secretary Timothy Geithner meeting with Collins. “This can be worked out in a bipartisan bill that will greatly strengthen our financial system and prevent the too-big-to-fail phenomenon,’’ she said after her meeting.

Geithner met with Massachusetts Senator Scott Brown last week, and Obama called him from Air Force One yesterday, seeking his support. Brown has said he opposes the bill, contending it could cost tens of thousands of jobs in Massachusetts. Democrats and some financial analysts dispute those figures.

Also yesterday, Obama’s proposal for a new tax on large banks picked up support as Democratic lawmakers sought ways to help fund their priorities or cut the deficit by targeting institutions that benefited from the 2008 Wall Street bailout.

Senator Chuck Schumer, Democrat of New York, wants to include the bank tax in the financial regulations bill, a pitch Dodd said he would probably oppose.

Obama has proposed a tax on bank liabilities that would raise about $90 billion over the next decade.

“I think the administration proposal is a common-sense way to make sure the taxpayers are repaid,’’ Schumer said.

Democrats are looking for money to pay for several measures, including a one-year extension of a series of popular tax cuts that expired at the end of 2009.

Senator Max Baucus, Democrat of Montana and chairman of the finance committee, is planning hearings to promote the tax. Schumer’s support is key because many of the affected firms are in New York.

In 2008, Congress and former president George W. Bush approved spending $700 billion to bail out institutions as the financial system was on the brink of collapse. The Troubled Asset Relief Program was later expanded to include automakers and homeowners, which would not be subject to the new tax.

The TARP program plans to spend a total of $497 billion, according to a report released yesterday by its inspector general. To date, firms have repaid $186 billion, with billions more expected to be repaid.

Still, the program is projected to result in a loss to taxpayers of as much as $127 billion. The law that created TARP requires the president to submit a plan by 2013 to recoup that money.

Banks argue that a new tax would reduce lending and increase fees for consumers just as the economy is picking up.

Material from the Associated Press and Washington Post was used in this report.