WASHINGTON (AP) — Congress passed fundamental new controls on U.S. banks and financial institutions, imposing the most stringent new curbs since the 1930s Great Depression and handing President Barack Obama his third major legislative victory.
Obama's Democrats prevailed Thursday after a year of pushing the legislation that won approval of only three Republicans in a 60-39 vote. The Senate roll call reflected the unrelenting partisanship that grips the United States with the approach of congressional elections in November.
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The measure was closely watched globally for proof that Obama could deliver on his promise to crack down on financial practices that took the American financial system to the verge of collapse 22 months ago. Countries across the world are still trying to recover from the meltdown that swept through the global economy.
"I'm about to sign Wall Street reform into law, to protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive and far less prone to panic and collapse," Obama said.
"Unless your business model depends on cutting corners or bilking your customers, you have nothing to fear."
The law gives the government new powers to break up companies that threaten the economy, create a new agency to guard consumers in their financial transactions and force transparency on shadow financial markets that escaped the oversight of regulators. The vote came on the same day that Goldman Sachs & Co. agreed to pay a record $550 million to settle charges that it misled buyers of mortgage-related investments.
Large, failing financial institutions would be liquidated and the costs assessed on their surviving peers. The Federal Reserve is getting new powers while falling under greater congressional scrutiny.
Consumer and investor transactions, whether simple use of debit cards to the most complex securities trades, face new safeguards or restrictions.
"When this earthquake hit, there wasn't nearly enough oversight, transparency or accountability to shield us from the fallout," Senate Majority Leader Harry Reid said. "This law will strengthen all three."
The White House said Obama likely would sign the bill next week.
With the president sinking in public opinion polls that measure confidence in his economic leadership, Obama was certain to hail the law that is designed to head off a repeat of the near-collapse of the U.S. financial system shortly before he took office.
The bill had been Obama's top domestic priority after the passage of health care legislation and his early victory in setting up a nearly $800 billion fund to pump life into the sputtering economy that went into near free-fall after the financial meltdown.
The nearly unanimous Republican opposition was a reflection of the party's solidarity in bucking Obama's legislative agenda. The measure passed two weeks ago in the House of Representatives, where Democrats hold a larger margin of votes.
The reform package closely resembles the White House plan unveiled a year ago, and in some ways is even tougher.
White House spokesman Robert Gibbs said passage would become a tool for Democrats in the fall vote.
"This will be a vote that Democrats will talk about through November as a way of highlighting the choice that people will get to make in 2010," he said.
The political benefits to Democrats, however, stand to be overshadowed by lingering high unemployment. And Republicans were betting that public antipathy toward big government and worries over jobs would trump anger at Wall Street.
Republicans are widely expected to recapture many seats from the Democratic majority in both the House and Senate in November. Americans' frustrations and fears spawned by near-10 percent unemployment and a sputtering economic recovery have played heavily into minority hands.
The Republicans also have largely welcomed into their ranks ultraconservative tea party activists and candidates who promise to reduce government size and power by, in many cases, uprooting social welfare programs. Their political strategy has been to paint the new financial regulations just another symptom of government overreach.
"We're going to be driving jobs and business overseas with this massive piece of legislation," said Republican Sen. Saxby Chambliss.
Republican Sen. Richard Shelby denounced it as a "legislative monster."
The bill ends a trend that has eased regulations, peaking in 1999 with the elimination of Depression-era bans on commercial banks also making risky investments with depositors money.
Industry lobbyists fought against a number of restrictions in the bill, ultimately winning some concessions. In the end, the final bill was tougher than they wanted but not as restrictive as they feared.
"Core elements of the bill will contribute to a stronger, more secure financial system," Steve Bartlett, president of the Financial Services Roundtable, a banking group, said in a speech Thursday. "Some items in the legislation we did not support and we expressed our views accordingly. Nevertheless, we are committed to making those items work as well as possible."
The American Bankers Association was not as conciliatory.
"The result will be over 5,000 pages of new regulations on traditional banks and years of uncertainty as to what the massive new rules will mean," said Edward Yingling, president and CEO of the group.
Associated Press writer Jim Kuhnhenn contributed to this report.
Copyright 2010 The Associated Press.