House Democrats cleared a crucial hurdle Wednesday in their drive to expand the government's power over Wall Street even as black lawmakers warned that they would use their votes as leverage to secure more economic aid to African-American communities.
The House Financial Services Committee voted to slap new restraints on big Wall Street institutions and to demand greater openness from the nation's central bank, the Federal Reserve, setting the stage for final passage next week on a broader and sweeping piece of regulatory legislation.
The committee approved the measure 31-27 along party lines. The 10 members of the Congressional Black Caucus on the panel, all Democrats, boycotted the vote. Had they voted with Republicans, the bill would have failed.
"Since last September, we have continuously voted for bailout and reform for the very institutions that created this devastation, without properly protecting the African-American community or small business," Rep. Maxine Waters, D-Calif., said at a post-vote news conference. "That stops today."
Waters said black caucus members have had to educate Obama administration officials and the White House inner circle about the struggles in African-American communities, where unemployment far exceeds the already high national average.
Among the group's demands were greater assistance for minority-owned auto dealerships, greater assistance to banks that lend in African-American communities and more government advertising in minority-owned media.
The black caucus' warning comes just days before the House begins debate on a comprehensive regulatory overhaul. That package, set to go to the floor on Wednesday, would include the creation of a new consumer finance protection agency, restrictions on complex financial instruments blamed for feeding last year's panic and restrictions on Wall Street compensation.
Financial Services Committee Chairman Barney Frank, D-Mass, said he expected the bill to be debated for three days before final passage.
Waters would not spell out what kind of progress lawmakers would need to see to guarantee their vote. House leaders were scrambling to assemble a jobs bill, and President Barack Obama was holding a jobs "summit" Thursday to air ideas on how to fight unemployment.
"One jobs summit at the White House does not solve the problem," Waters said. "He still has more to do."
The legislation approved Wednesday focused on how to monitor large financial institutions and how to restrain them if they pose a risk to the economy or dismantling them if they fail. The costs of winding down a company would be borne by large institutions that would be assessed an up front fee that would finance a "resolution fund." The fund would be capped at $200 billion.
House Speaker Nancy Pelosi, D-Calif., applauded the committee vote.
"When coupled with strong reforms to protect consumers and Main Street that the House will vote on next week, it will end the reckless practices that resulted in the worst financial crisis since the Great Depression," she said.
The Senate was moving at a slower pace. There, Senate Banking Committee Chairman Christopher Dodd, D-Mass., has formed bipartisan working groups to help assemble a bill. His draft proposal met stiff Republican resistance last month, and some Democrats also took issue with some provisions.
In the House, pieces of the broader, combined regulatory bill still face their own obstacles. Biggest among them is the proposal to require an extensive Government Accountability Office audit of the Federal Reserve, a provision pushed by Rep. Ron Paul, R-Texas, that has broad bipartisan support.
Critics, led by Frank, worry that the audit would be too intrusive, scare away foreign institutions that do business with the central bank and could indirectly lead to higher interest rates. They proposed a more limited audit.
Frank said he wants to gauge reaction to the provision and said its status remains up in the air. Pelosi is expected to side with Frank on the issue.
But the audit proposal had been endorsed by more than 300 House members and is popular with Democrats.
On the Net:
House Financial Services Committee: http://financialservices.house.gov