Financial Reform Passes the Senate.

After a tense afternoon of votes stretched into the evening, the Senate passed its financial-reform legislation, setting the stage for negotiations with the House to craft a final package that will be voted on once more by both chambers before arriving on President Obama's desk.

After the Democrats, joined by three Republicans, successfully overcame efforts to block a vote on the bill in the afternoon, 30 hours were allotted before final passage -- unless Republicans could be convinced to dispense with the debate and any additional amendments.

Particularly at stake was an amendment from Sam Brownback to exempt auto dealers from consumer regulation and another amendment proposed by Sens. Merkley and Levin to strengthen a measure already in the bill to limit the kinds of risky business banks can engage in.

While the Merkley-Levin amendment could not be voted on post-cloture due to a technicality, in a clever bit of legislative jujitsu, the two attached their amendment to Brownback's as a second-order amendment, meaning that both would have to be voted on together to enter the bill. Reformers opposed Brownback and supported Merkley-Levin, but could at least see stronger restrictions on Wall Street if Brownback succeeded.

Republicans, however, proved reluctant to force another symbolic vote that would reveal their support of Wall Street. Brownback pulled his amendment, leading to an agreement on how to proceed: After a procedural objection from Republicans that required 60 votes to set aside, voting for final passage began at approximately 8:45. The bill passed 59-39; Democrats Maria Cantwell and Russ Feingold registered their opposition from the left after amendments to strengthen the bill were left to languish, while four Republicans -- Chuck Grassley, Susan Collins, Olympia Snowe, and Scott Brown -- crossed the aisle to support the bill. (Two senators, Robert Byrd and Arlen Specter, did not vote.)

Afterward, Democratic members congratulated each other and Banking Committee Chair Chris Dodd, who has aggressively managed this bill on the floor for nearly a month. At a press conference following passage, Harry Reid lauded his colleagues and the four Republicans who supported the bill while criticizing the rest of the GOP caucus in campaign terms -- "For those who wanted to protect Wall Street, it didn't work."

On Monday, the Senate will choose its representatives for a conference committee to reconcile the differences between their bill and the House version, which passed under the management of House Financial Services Committee Chairman Barney Frank in December. While the two are not radically different, key disagreements will arise regarding loopholes in consumer protection, a plan to force major banks to divest their derivatives trading desks (which has divided even reformers), restrictions on bank size and scope, and the details of regulatory reorganization.

Lobbyists, reform advocates and legislators from both parties will still have a venue to struggle over the shape of the ultimate law while the Democrats strive to maintain a filibuster-proof majority behind the bill in the Senate. Dodd and Frank anticipate a final vote sometime before July 4.

While this legislation is undoubtedly stronger than many observers anticipated and a major step toward reform, it has also left some progressives with a bitter taste in their mouth -- notably Cantwell and Feingold, who opposed the bill -- but also Sen. Ted Kaufman, whose amendment to cap the size of the banks was defeated early. While he supported the bill, Kaufman issued a statement lamenting that it was not stronger and urged his colleagues to consider size restrictions "before another financial crisis -- like the one unfolding today in Europe -- visits our shores."

I'll have more thoughts on the substance and importance of this legislation in the morning, but it's safe to say that tonight legislators took a major step toward the largest overhaul of our financial system since Roosevelt's New Deal.

"Tonight is another historic moment," Democratic Whip Dick Durbin said after the final vote. "We've made certain that we learned the lesson of this recession."

-- Tim Fernholz

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