House Republicans on Thursday defeated Democrats' efforts to block a vote on the financial reform bill, clearing the way for its adoption by late evening.
"Now the bill is highly likely to pass," said Edward L. Yingling, chief lobbyist for the American Bankers Association.
"I think we are home," agreed Phil Anderson, vice president of federal affairs for the American Council of Life Insurance.
(For updated coverage, visit www.americanbanker.com.)
Lawmakers voted 227 to 203 to proceed with a vote on the bill but then spent the bulk of the day on unrelated legislation.
Financial reform had been expected to sail through the House on Thursday, but late Wednesday many Democrats turned against it after the House Rules Committee refused to allow a vote on an amendment by Rep. Barbara Lee, D-Calif. The provision would have prohibited insurance companies from discriminating against, or "redlining," women and minority applicants.
But when Democrats failed to block the procedural motion-that is, a rule setting the terms of debate-Democratic Caucus Chairman Martin Frost of Texas predicted the reform bill would pass by a healthy margin.
The debate leading up to the procedural vote was fiercely partisan.
One after another, Democrats blasted Republicans for violating the spirit of bipartisan compromise that had reigned before the Rules Committee denied the Lee amendment. "Last night ... we finally had a chance to get this right," said Rep. Joe Moakley, D-Mass. "The Republican leadership decided to make war instead of history."
Rep. Frost agreed. "The Republican majority has given short shrift to redlining," he said. "This is a fundamental issue for Democrats."
But Republicans countered that it was Democrats who were playing politics, and claimed the bill contains strong consumer protections and expands the Community Reinvestment Act.
"We unfortunately have gotten to the point where we are letting very, very petty partisanship undermine an important issue," said Rules Chairman David Dreier, R-Calif.
Democrats also used the debate on the rule to blast the bill's consumer privacy protections as too weak, and to complain that the safeguards for medical records were full of exceptions. "It has a loophole big enough to drive an armored truck through it," said Rep. Jay Inslee, D-Wash.
But House Banking Committee Chairman Jim Leach, R-Iowa, argued that the bipartisan privacy deal "is the strongest privacy protection bill ever brought before this body."
The Rules Committee, as expected, rejected an amendment sought by Rep. Edward J. Markey of Massachusetts and other Democrats that would have let customers block financial institutions from sharing confidential information among affiliates. Instead, the bill would let customers block only information transfers to third parties for marketing purposes.
The Rules Committee, as expected, also excluded any amendments to toughen limits on unitary thrifts and bank operating subsidiaries.
The House agreed to debate 11 amendments that include anti-tying measures and a requirement that the Securities and Exchange Commission "consult and coordinate" with banking regulators on loan loss reserving issues.
Treasury Secretary Robert E. Rubin sent a letter to lawmakers opposing another amendment by Rep. Bob Barr, R-Ga., that would scale back federal anti-laundering laws. Among other provisions, it would eliminate the requirement on banks to file suspicious activity reports and replace these reports with narrower ones on "possible violations of law and regulations."
In a letter to lawmakers of both parties, Treasury Secretary Robert E. Rubin said the amendment would "significantly undermine a critical law enforcement tool-the Bank Secrecy Act."
John J. Byrne, an ABA senior federal counsel, said banks are generally comfortable with the current system and fear the amendment would inadvertently lead to customer lawsuits by making the reporting voluntary.
"This is the wrong time, and the wrong approach," he said.
The White House issued a statement supporting the bill, but it also raised more than a half dozen objections.
The privacy provisions, while an improvement, do not go far enough, according to the administration. However, the White House plans to pursue additional consumer protections separately.
The White House also urged lawmakers to strike the bill's medical privacy provisions, saying they "would preempt important existing protections."
The Senate passed financial reform May 6. A conference committee will resolve differences between the House and Senate versions of the bill.