Senate Defeats GOP Attempt To Water Down Derivatives Reform By Wide Margin

The Senate Thursday swept aside a Republican amendment which would have weakened proposed legislation to regulate and shine a light one of the most shadowy markets on Wall Street.

By a vote of 39-59, senators defeated a substitute amendment offered by Sen. Saxby Chambliss (R-Ga.) that would have weakened a measure put forward to impose new rules on what today is an unregulated $600 trillion derivatives market.

That means the Wall Street Transparency and Accountability Act of 2010, introduced by Sen. Blanche Lincoln (D-Ark.) remains alive as part of the broader financial reform package authored by Sen. Chris Dodd (D-Conn.), currently under consideration in the Senate.

“My Wall Street reform proposal is landmark reform, and for the second time, this language has received strong bipartisan support in the U.S. Senate,” says Sen. Blanche Lincoln (D-Ark.), the lawmaker behind the stronger derivatives measure. “The Dodd-Lincoln bill will bring 100 percent transparency to the nation’s financial markets, get banks back to the business of banking and keep jobs on Main Street. This is a significant step toward bringing real reform to our nation’s financial markets, providing the transparency and accountability that the American people deserve.”

A statement from Lincoln following the vote notes that even Republican Sens. Chuck Grassley of Iowa, and Olympia Snowe, of Maine, voted in support of the her language instead of the Chambliss alternative.

Trading of derivatives has come under fire for the role it played in the financial meltdown of 2008, which required massive taxpayer-funded bailouts. Backers of the Lincoln bill say her legislation would provide new transparency to derivatives Trading, and would protect consumers from risky behavior in the financial industry.

“If passed, the Chambliss amendment would have watered down the bill, allowing big Wall Street perpetrators of the financial crisis to escape meaningful regulation,” says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group (U.S. PIRG), which supports strong financial regulatory reform. “Derivatives would continue to be traded in the shadows, with little or no transparency, under this amendment, making it very difficult for regulators to police these markets and prevent future crises, and impossible for market participants to know when entities like AIG are amassing unsustainable levels of risk.

“Defeating this gutting amendment is a key step toward reining in Wall Street,” Mierzwinski adds.

Mierzwinski, however, notes continued refinements he wants to see in Dodd’s larger financial reform package.

“The Restoring American Financial Stability Act, S. 3217, needs to be strengthened, and must include a strong, independent Consumer Financial Protection Agency, must allow states and their attorneys general to enforce the laws, must open the shadow markets where derivatives are traded, and must end, once and for all, ‘too big to fail,’” he says.

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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