U.S. Senate Approves Anti-Bailout Amendment to Financial Bill

May 5 (Bloomberg) -- The U.S. Senate today approved a change to financial-overhaul legislation banning taxpayer-funded bailouts of Wall Street firms as Democrats aim to attract Republican support for the broader bill.

Lawmakers voted 96-1 for an amendment offered by Senator Barbara Boxer, a California Democrat, to bar use of government funds to rescue failing financial companies. The move revises a provision that Republicans said would perpetuate bailouts.

Senate Banking Committee Chairman Christopher Dodd, the Connecticut Democrat who drafted the overhaul legislation, said today he wants to satisfy those who doubt “the too-big-to-fail proposition is no longer a question.”

The Senate is debating Dodd’s proposal for a sweeping rewrite of rules governing Wall Street, intended to prevent a repeat of the 2008 financial crisis that led the U.S. to extend $700 billion in taxpayer aid to companies including Citigroup Inc. and Bank of America Corp.

Republicans have argued that the bill contains loopholes that would permit future bailouts, focusing their opposition on a provision giving the government authority to liquidate failing financial firms whose collapse would roil the economy.

Dodd today announced he and Alabama Senator Richard Shelby, the Banking Committee’s top Republican, had struck a deal on an amendment to allay those concerns.

The two had agreed on a deal that would eliminate a proposed industry-paid $50 billion fund to cover the cost of liquidations and ensure shareholders and unsecured creditors bear losses when the government unwinds a company, Dodd said today on the Senate floor. The Senate is also voting on this amendment today.

The deal allowed the Senate to proceed to votes on amendments after a week’s delay as the two lawmakers worked toward compromise.

Shelby

Shelby said his agreement with Dodd didn’t mean he supported the broader bill.

“This over 1,500 page bill contains a broad reach into the global financial system and the American economy,” Shelby said on the Senate floor. “Now that we are over this particular hurdle, we will be addressing many additional concerns that we have in the coming days.”

Dodd’s bill, which was approved by the Senate Banking Committee in March over Republican opposition, is based on a proposal President Barack Obama released last June. The measure is similar to legislation approved by the House of Representatives in December.