After three weeks of contentious debate, the Senate approved landmark financial reform legislation 59 to 39 late Thursday.

The bill is the most significant piece of banking-related legislation since the Great Depression and would enact sweeping changes to the system. 

The legislation must now be reconciled with a House reform bill passed in December.

The Senate bill would establish a regime for federal regulators to collectively monitor systemic risks, give the Federal Reserve Board power over the largest financial companies, grant authority to the Federal Deposit Insurance Corp. to unwind such companies in a crisis and create an independent consumer protection bureau that would be housed in the central bank.

It would regulate derivatives by requiring most to be centrally cleared and traded on exchanges and would force banks to spin-off their swaps desk.

 The bill also includes several additional restrictions, many of which were added during the past few weeks of debate.

It would compel the Fed to regulate interchange fees on debit cards, and eliminate the ability of regulators to include trust preferred securities towards the calculation of Tier 1 capital. It would also establish minimum underwriting standards for all mortgages.

After a procedural vote earlier in the day to wrap up debate cleared 60 to 40, lawmakers spent several hours Thursday afternoon figuring out how to handle pending amendments.

In the end, nothing significant was added to the legislation. A pending amendment from Sen. Sam Brownback, R-Kans., that would have excluded auto dealers from the reach of the consumer bureau was withdrawn, forcing the withdrawal of a second-degree amendment to it from Sens. Jeff Merkley and Carl Levin to strengthen the Volcker Rule to ban proprietary trading. 

Shortly before the vote Thursday, Levin and Merkley expressed their dismay that their amendment would not be put to a vote. They accused Republicans of withdrawing the Brownback amendment in order to kill their measure. 

They argued that two days ago they were willing to require a 60 vote threshold for the adoption of their amendment, despite knowing they would lose potentially three Democrats.

"It seems like we are coming to the end of the trail in regards to the bill and in regards to our amendment the Merkley-Levin amendment," said Merkley.

"As a freshman senator I still believe in the Senate as a place where you take on tough issues and you have debates and you take votes and you don't duck them... I think this is not what the American public deserves... High risk investing shouldn't take place under the same roof as depository taking."

Levin said Republicans' decision to block a vote on their amendment "would be a very very dramatic moment I believe demonstrating Wall Street's power, because our amendment strengthens the underlying bill."

It is expected the bill will now head to a formal conference with the House. Senate leaders said they would vote on conferees next week, who will attempt to resolve differences between the versions. Both Merkley and Levin held out hope that their amendment, or a version of it, could be added in conference.

"Sen. Dodd supports our amendment and I believe he will try to get as much of our amendment in conference committee," Levin said.

President Obama warned Thursday that the financial services industry would attempt to weaken reform while the differences between the two bills are worked out. 

"The House and Senate will have to iron out the differences between the two bills and there is no doubt that during that time the financial industry and their lobbyists will keep on fighting," he said in an appearance at the Rose Garden prior to the vote. "But I will ensure that we arrive at a final product that is both effective and responsible, one that holds Wall Street to high standards of accountability and secures financial stability while preserving the strengths and crucial functions of a financial industry that is central to our prosperity and ability to compete in a global economy."

Although many bankers oppose the bill, Obama said: "Our goal is not to punish the banks but to protect the larger economy and the American people from the kind of upheavals that we've seen over the past few years. Today's action was a major step forward in achieving that goal."

Ahead of the vote, Sen. Richard Shelby, R-Ala., blasted the bill on the floor.

"The supporters of this bill have argued that it will stabilize the financial sector, the bill itself. I'm not sure, however, it can stabilize anything when it does nothing," he said. "The American people are being misled here. The authors of this bill are telling them that this legislation has been drafted to address the recent financial crisis and that it will tame Wall Street. I'm afraid they are going to be disappointed."

He lambasted the bill for failing to fix the financial system, particularly by ignoring the government-sponsored enterprises and a broken housing finance system. He argued Democrats' have pointed to the consumer bureau as a top achievement of the bill yet said the result would be a wasteful bureaucracy.

"It has been amended dozens of times yet the bill does nothing to effect the ongoing unlimited bailouts of Fannie  and Freddie," he said. Shelby also criticized the bill's creation of a consumer protection bureau calling it a "massive new consumer bureaucracy."

"The new consumer protection bureaucracy is funded by over a half a billion dollars per year, funded through an Argentina-style raid on our central bank.”

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