Obama-Dodd financial reform proposal fails first test vote in Senate; talks on compromise continue 

All 41 Senate Republicans voted against a motion to proceed to debate the Obama-Dodd financial reform bill this afternoon, and they were joined by at least one Democrat. The tally doesn't kill the bill, but it does complicate things immensely for Senate Majority Leader Harry Reid, who insisted on having the roll call today.

Reid needed at least 60 votes, but failed by two, since all of the GOPers opposed the motion, as did Sen. Ben Nelson, D-NE.

The Obama-Dodd proposal establishes a $50 billion bailout fund, grants immense new regulatory and bailout powers to the Federal Reserve and the FDIC, creates a new consumer financial protection agency and ... does nothing about Fannie and Freddie, whose active endorsement of sub-prime and other risky mortgages lead to the Great Recession.

Democrats are, predictably, portraying the vote as Republicans taking care of their Wall Street allies, with House Majority Leader Steny Hoyer being quick to release this statement:

“I am extremely disappointed that Republicans have once again blocked progress for middle-class Americans. To a person, Senate Republicans showed today that they are continuing to put the interests of Wall Street above those of Main Street – just as House Republicans did when they voted against Wall Street reform in the House.

"Democrats will keep fighting to help working Americans and ensure that taxpayers are not put on the hook for the risky decisions of the big banks on Wall Street. We will enact legislation this year that holds Wall Street accountable and ends the idea that any bank is ‘too big to fail.’”

Hoyer said nothing, of course, about the fact 69 percent of the political contributions by Goldman Sachs executives have gone to Democrats in the past year, nor did he say anything about the fact President Obama was the biggest individual beneficiary of Goldman Sachs contributions. Guess those facts conflicted with the narrative about greedy GOPers.

Sen. David Vitter, R-LA, had a little different take on the issue, saying “the vote today sends a clear message to President Obama and Senator Dodd that the bailout bill they’re trying to rush through Congress is the wrong approach to financial reform. We need a bipartisan bill that will end ‘Too Big to Fail,’ put a stop to taxpayer bailouts of failed banks, and target the real causes of the financial crisis, such as irresponsible lending driven largely by the excesses of Fannie Mae and Freddie Mac. I hope the president and his allies in Congress will take a step back and work with me and other members of the Senate Banking Committee to craft a bill we can all support.”

Vitter's comments were mirrored on the House side by Rep. Jeb Hensarling, the second ranking GOPer on the House financial reform and banking committee headed by Rep. Barney Frank.

Hensarling said "this bill institutionalizes rather than eliminates the notion of too big to fail, contains a $50 billion bailout fund that will enshrine us as a bailout nation, and creates a new credit rationing agency with the power to outlaw products and crush innovation.

"But for every economically damaging idea there is in this bill, perhaps the worst idea is what is not in the bill -- meaningful reform of Fannie Mae and Freddie Mac, the original too big to fail market distortions whose collapse has already cost the American taxpayer over $125 billion, with the potential to cost hundreds of billions more.”

Meanwhile, Dodd continues talks with Sen. Richard Shelby of Alabama, the ranking GOP member of the Senate Banking Committee. Shelby expressed optimism earlier today that the talks would result in a compromise bill that will draw bipartisan support and gain Senate passage.

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Mark Tapscott

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