Senators Brown (R-MA), Snowe (R-ME) and Collins (R-ME) have indicated that they will support the financial reform package. Along with Maria Cantwell, who had hesitated because of the bill's relative weakness at correcting the key problems that caused the financial crisis, it appears the bill is headed to passage by the Senate this week. See Financial Times, Wall Street Reform Proposal Wins Key Support, July 12, 2010.
Perhaps the weakest part of the bill is its failure to definitively wean big banks from the risky (but lucrative, as long as the US picks up their losses) derivatives business and investments in hedge funds and similar entities. Naked credit default swaps, the critical derivatives that permitted banks to become interconnected casinos gambling on ups and downs in companies without owning a cent of their equity or bonds (an insurance product without insurance regulation to prevent moral hazard), are essentially unregulated in the conference report agreement. The Fed will have the power to regulate them, but the Fed has long been in bed with the banks and has insufficient independence to recognize the depth of the problem. Moving most derivatives into subsidiaries is not the same as spinning them off entirely into separate entities. The banks won on this one, and this was the most important stake in the bundle.
While the consumer protection agency is much needed, it is weaker than it should be. It is under the Fed, which can veto rules if the Fed thinks they pose a risk for banks. Since banks always say that any rule that limits their profits poses a risk, this will be a constant worry for consumer protection rules. Further, auto dealers--one of the primary issuers of credits to ordinary consumers--lobbied for and won exemption from the agency's rules. Of course, every Congressman has auto dealers in his or her district, but you'd think that the thousands of car buyers in each district who will fall prey to any shucksterism from auto dealers would garner more of the reps/ attention.
Finally, Brown's vote was a costly one. He was one who fought to permit banks to own hedge funds--essentially a decision to allow them to continue to gamble with other people's money. And he nixed the proposal to have the banks pay for the cost of increased regulation due to their risky behavior. Why in the world shouldn't the banks pay? I suppose they must have contributed a good deal to Brown's campaign chest. There's no other reason for failing to assess the banks their fair share of the added monitoring costs.
What convinces me that this bill is much too weak is that the banks are satisfied that they won sufficiently to keep doing business as usual.