Senate Approves Sweeping Financial Reform

The Senate approved the sweeping overhaul of the financial system on Thursday night, after months of debate over the biggest legislation to hit Wall Street since the Great Depression.

The 59-39 vote was the next step to giving President Barack Obama his second major legislative victory following the healthcare reform bill passed earlier this year.

The response to the financial crisis in 2007 to 2009 that led to massive amounts of taxpayer dollars being used to bailout the banks will now go to the U.S. House of Representatives to be merged with a previous measure approved in December.

If successful, the bill would then be sent to President Obama to be signed into law, which is something analysts expect to happen sometime before July 4.

"Over the last year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars in ads, and when they couldn't kill it they tried to water it down. ... Today, I think it's fair to say these efforts have failed," Obama said. "The House and the Senate will have to iron out the differences between the two bills. And there's no doubt that during that time the financial industry and their lobbyists will keep on fighting."

One of the biggest differences is a provision in the Senate bill that would make big banks spin off some of their derivative business into separate subsidiaries. These derivative units are among the most lucrative for banks.

Overall, the two bills are broadly similar and include measures to curb abusive lending, particularly in the mortgage industry, and the ability to allow the liquidation of troubled companies at no cost to taxpayers no matter how big or complex the institution may be.

"The recession we're emerging from was primarily caused by a lack of responsibility and accountability from Wall Street to Washington," Obama added. “That’s why I made passage of Wall Street reform one of my top priorities as president, so that a crisis like this does not happen again."

Commenting on the bill's passage related to financial stocks, analysts at FBR Capital noted that the Senate decided not to vote on any additional amendments including Merkley/Levin amendment on a tougher Volcker Rule. The firm expect the banks and broker/dealers to react positively on the news as some of the most onerous amendments were not included in the bill. However, the firm warn that this is not the end of headline risk, as there will be much speculation in the coming week as to what the final bill will contain.

Related Stocks: Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C).

You May Also Be Interested In

• GXO Logistics, Inc. (GXO) Prices $1.1B Notes Offering
• Increasing unusual put option volume: BFH HCP CARR SKX HL PSEC NSC FTAI
• GXO Logistics, Inc. (GXO) Launches Notes Offering