Posted By Moss M.Jacques

Senators shrug off 'flaws' in financial reform bill Harkin and Grassley are less than giddy about watered-down overhaul package, but cast votes in its favor. Written BY COURTNEY BLANCHARD TH STAFF WRITER Sunday, May 23, 2010

Pass a massive bill these days and it's hard to come by a completely glowing critique. even many of those who voted for it said the financial reform bill was only a "step in the right direction." After the late Thursday passage of the financial reform package, lawmakers issued a barrage of press releases decrying or celebrating the bill, often with the same message -- it doesn't go far enough. Republican opponents said the bill would put too much power in the hands of the government. Those who voted for it, including both Iowa senators, said it was a good start, but they would like to see more reforms.

"I voted for this measure because it is a step in the right direction," U.S. Sen. Tom Harkin, D-Iowa, said. "This bill will create a strong consumer financial protection bureau that will put a stop to a whole range of predatory financial practices targeting ordinary Americans."

The bill would strengthen the role of the inspectors general to fight fraud and mismanagement at the major federal financial agencies, including the Securities and Exchange Commission and the Federal Reserve. A "financial stability oversight council" would work to find risks in the financial system. Hedge funds would be subject to registration with the SEC. Banks would have to spin off their derivatives trading into new subsidiaries. The bill also strives to prevent another massive bailout at taxpayer expense.

Two area senators crossed party lines in the vote -- U.S. Sen. Russ Feingold, D-Wis., broke with Democrats to vote against the bill, and Sen. Chuck Grassley, R-Iowa, was among four Republicans to vote for the measure.

"The bill does not eliminate the risk to our economy posed by 'too big to fail' financial firms," said Feingold in a statement. "Nor does it restore the proven safeguards established after the Great Depression, which separated Main Street banks from big Wall Street firms and are essential to preventing another economic meltdown."

Before the vote, Grassley told reporters that the adoption of an amendment strengthening the role of inspectors general to oversee financial agencies pushed him closer to supporting the bill. The other Republicans to support of the bill were Sen. Scott Brown, of Massachusetts, and the two senators from Maine, Olympia Snowe and Susan Collins.

"There's no question this bill has flaws, but a message needs to be sent to Wall Street that business-as-usual is over," Grassley said in a statement. "This bill takes a step in the direction of trying to fix things. It starts to open up the Fed. It puts the massive derivatives market in the light of day. Other reform is needed, too, starting with Fannie and Freddie. It's a matter of transparency and accountability."

Grassley has advocated reform for the two federally subsidized mortgage lenders, Fannie Mae and Freddie Mac, but the bill doesn't address that. Harkin supported a measure to limit ATM fees, but that amendment never came up for a vote.

Most Senate Republicans didn't buy the "step in the right direction" argument and opted to vote against the bill.

"The federal government has doubled in size over the past decade," said Republican Senate leader Mitch McConnell, of Kentucky. "And yet every day this administration devises some new way to make it bigger, costlier and more intrusive."

The bill must now be reconciled with a House version that passed in December.