Top House and Senate negotiators who worked out a deal last week on overhauling financial regulations scrambled Tuesday to replace a bank fee that has drawn opposition from key Republicans and endangered its passage.
Eager to salvage one of President Barack Obama's legislative priorities, lawmakers on Tuesday planned to reconvene a House-Senate conference committee that had signed off on the final bill last week.
The bill's fate came into doubt following the death of Sen. Robert Byrd, D-W.Va., and new misgivings from three Republicans who voted for a Senate version of the bill last month.
At issue was a $19 billion fee that would be assessed on large banks and hedge funds to cover the costs of the legislation. Democratic House and Senate negotiators assembling the massive rewrite of bank regulations inserted the fee during last week's late night talks.
The alternative before the conference committee Tuesday would end the government's authority to use the $700 billion bank bailout fund, freeing about $11 billion toward the costs of the legislation. Under that plan, the balance of the cost could be covered by increasing premium rates paid by all commercial banks to the Federal Deposit Insurance Corp. to insure bank deposits.
The bailout fund, known as the Troubled Asset Relief Program or TARP, was scheduled to expire in October. The new proposal would end TARP as soon as the bill is enacted, essentially cutting Congress' spending authority from $700 billion to $475 billion. That creates an accounting adjustment that would help cover the bill's costs.
House Financial Services Chairman Barney Frank, who headed the joint House-Senate panel that assembled the bill this month, said he was optimistic the new proposal would secure the needed Senate votes.
"The die is cast," he said.
Sen. Scott Brown, R-Mass., precipitated the new discussions after voicing opposition to the $19 billion fee. On Tuesday, he sent a letter to Frank and Senate Banking Committee Chairman Chris Dodd saying he would withdraw his support for the bill and vote against it if the fee remained in it.
The fee would have been assessed on banks with assets of more than $50 billion and hedge funds with more than $10 billion.
Republican Sens. Olympia Snowe and Susan Collins of Maine, both of whom also voted for the Senate bill last month, said they, too, had qualms about the bank assessment. Brown, Snowe and Collins were three of only four Republicans who voted for the Senate bill.
With Byrd's death Monday, Senate Democrats can't afford to lose any votes to overcome the 60-vote procedural hurdles that could defeat the legislation.
Seeing nearly a year of work crumbling before them, Dodd, Frank and Democratic leaders working with White House and Treasury officials hurried to come up with an alternative.
The legislation would rewrite financial regulations by putting new limits on bank activities, creating an independent consumer protection bureau, and adding new rules for largely unregulated financial instruments.
Frank, D-Mass., and Dodd, D-Conn., had hoped the House and Senate would vote this week on the bill so they could send it to the president by July 4.
The uncertainty surrounding the bill, however, raised new questions about Congress' ability to complete the bill this week.
House Majority Leader Steny Hoyer, D-Md., said the bill's questionable status in the Senate would not affect when the House takes up the bill. "But we are trying to work with the Senate to ensure that we both take up a version that does in fact have 60 votes," he said.
(This version CORRECTS the amount of money generated by ending bailout fund.)
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