Yesterday, as expected, Republicans and Sen. Ben Nelson (D-NE) filibustered the Senate’s tax extenders bill, which would have extended unemployment benefits and several tax credits, as well as provided fiscal aid to states to help with their Medicaid bills. As a result of the Senate’s inaction, states may be forced to cut 200,000 jobs along with a host of health care and education programs, and 1.2 million people who were expecting unemployment benefits will see them disappear.

This obstructionism comes despite Senate Democrats chopping their original package nearly in half and finding pay-fors for the entire package except for the unemployment insurance. It also occurred despite a subdued economic assessment from the Federal Reserve, which said that “financial conditions have become less supportive of economic growth on balance.” “We have gone more than the extra mile,” said Senate Finance Committee Chairman Max Baucus (D-MT).

Senate Majority Leader Harry Reid (D-NV) said that he is going to pull the extenders bill and move onto a bill meant to boost small business lending. “We’re going to move to the small business jobs bill,” said Reid. “We can’t pass [the extenders bill] until we get some Republicans…It’s up to them.” However, this is the same small business bill that Republicans have already said that they are going to bog down in their intense desire to cut taxes for the heirs of multimillionaires and billionaires:

A small-business bill coming soon to the Senate floor could provide the catalyst for a big issue: the long-awaited debate over the future of the estate tax. Asked Thursday whether he planned to push for an estate tax amendment on that bill, Minority Whip Jon Kyl said: “Count on it.”

It would be incredibly irresponsible for Congress to find spending offsets to cut the estate tax, considering the state of the economy and that the money could be used on job creation measures. But it would be doubly irresponsible to do so without passing the extenders bill, thus leaving the unemployed and those who rely on services in their states simply out to dry.

There are currently 15 millions Americans unemployed, and almost half of them have been out of work for at least six months, which is a post-World War II record. There are nearly five workers actively searching for work for every job available, compared to 1.5 per job opening before the recession began.

At the same time, income inequality is the worst its been since 1928. According to a new report from the Center on Budget and Policy Priorities, “the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007 (the period for which these data are available).”

To take care of that top one percent while leaving the unemployed with no safety net at all is simply unforgivable, but it’s what Republicans (and Ben Nelson!) are forcing the Congress to do at the moment.

Early this morning, the conference committee reconciling the House and Senate versions of financial regulatory reform approved final language for the legislation after a marathon 20 hour negotiating session. The House conferees approved the reconciled legislation on a 20-11 vote and the Senate approved it 7-5. Both votes were party line. The bill now moves to one more vote in each chamber next week, where it can’t be amended further.

A flurry of changes were made to the legislation last night, including the addition of an exemption to the Volcker rule — a ban on banks trading for their own benefit with federally insured dollars — and a weakening of Sen. Blanche Lincoln’s (D-AR) provision requiring banks to spin-off their derivatives trading desks. However, the final bill seems to have retained Lincoln’s language requiring exchanges and clearinghouses for derivatives, as well as a provision from Sen. Susan Collins (R-ME) that compels banks to hold more capital against losses.

Below is a comparison of the House and Senate versions of the bill, as well as what ultimately ended up in the conference report. This is by no means an exhaustive comparison, but hits the major portions of the bill:

Provision	Senate Bill	House Bill	Reconciled Bill
Derivatives Exchanges and Clearing	Forced almost all derivatives trading onto exchanges and through clearinghouses, with narrow exemptions for non-financial end users.	Forced derivatives trading onto exchanges and through clearinghouses, but with wide exemptions for end-users, including financial companies.	Senate version
Derivatives Spin-Off	Forced banks to spin-off their derivatives trading desks into a separately capitalized entity.	Did not include a spin-off provision.	Forces banks to spin-off some derivatives trading activity (commodities, energy, metals, agriculture, equities and below-investment-grade credit default swaps) but keep trading related to interest rate swaps, foreign exchange swaps, credit, gold and silver, investment-grade credit default swaps and “any transaction used to hedge risk.”
Volcker Rule	Directed regulators to study and then implement a ban on proprietary trading.	Allowed regulators to ban proprietary trading at systemically risky firms.	Implements a stronger ban proposed by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR), but with an exemption sought by Sen. Scott Brown (R-MA) that allows banks to invest up to three percent of their Tier 1 capital in risky hedge funds and private equity firms.
Consumer Protection Agency	Included a Consumer Financial Protection Bureau, housed within the Federal Reserve, with an independent director and rule-writing authority. It could be overruled by a majority vote of the Financial Stability Oversight Council, which is composed of bank regulators.	Included a stand-alone Consumer Financial Protection Agency with an independent director and rule-writing authority.	Senate version
Auto Dealer Exemption	Did not exempt auto dealers from oversight by the new consumer regulator, but the Senate did pass a “motion to instruct” encouraging conferees to approve the House language.	Exempted auto dealers from oversight by the new consumer regulator.	House version
Resolution Fund	Included resolution authority funded by an after-the-fact assessment on large financial institutions. Any extra money needed to unwind a firm can be fronted by the Treasury Departent.	Included resolution authority pre-funded by an assessment on institutions with more than $10 billion assets. The fund could grow no larger than $150 billion.	Senate version

“This is going to be a very strong bill, and stronger than almost everybody predicted that it could be and that I, frankly, thought it would be,” said House Financial Services Chairman Barney Frank (D-MA). The legislation was renamed the Dodd-Frank bill after Frank and Senate Banking Committee Chairman Chris Dodd (D-CT).

Early this morning, at about 5:40 a.m., the conference committee reconciling the House and Senate’s respective versions of financial regulatory reform finished its work, with the House conferees approving the reconciled legislation on a 20-11 vote and the Senate approving it 7-5. Both votes were party line, with Democrats in favor and Republicans opposed. The bill was officially renamed the Dodd-Frank bill, after Senate Banking Committee Chairman Chris Dodd (D-CT) and House Financial Services Committee Chairman Barney Frank (D-MA).

Before I start complaining about what went on last night, I should take a moment to note that this bill has many strong provisions that will help create a safer, more stable, and fairer financial system that does far more than the current one to protect consumers and rein in Wall Street excess. It creates a new consumer protection regulator, a resolution authority for dismantling failed banks without taxpayer money, and crafts a regulatory regime for derivatives where currently none exists. These are all significant achievements.

However, there were also some unsavory compromises worked out by the conferees overnight that will render the bill less transformative than it could have been. For instance, while a stronger version of the Volcker rule — a ban on banks trading for their own benefit with federally insured dollars — proposed by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR) was included, conferees added an exemption to the rule sought by Sen. Scott Brown (R-MA) that allows banks to continue to invest money in risky hedge funds and private equity firms.

Not only was Brown’s exemption included, but negotiators decided to allow banks to invest three percent of what’s known as Tier 1 capital, as opposed to three percent of what’s known as tangible common equity (TCE). This is a huge distinction, as banks have far more Tier 1 capital than TCE. As Shahien Nasiripour explained, this small change means that banks can place bets with billions of dollars more than was envisioned by the original Volcker rule proposal:

Using JPMorgan Chase, the nation’s second-largest bank by assets with more than $2.1 trillion, as an example, the bank would be able to invest an additional 40 percent of its cash, or more than $1.1 billion, in the activities that Volcker wanted to prohibit banks from engaging in, according to the firm’s latest annual filing with the Securities and Exchange Commission.

Permitting banks to invest in risky entities strikes at the very heart of the Volcker rule, as former Federal Reserve Chairman Paul Volcker himself has said. “Allowing a bank to invest in a speculative fund goes against the very intent of the bill as we seek to define those activities that are worthy of government protection,” he said.

The bill now moves to one more vote in each chamber of Congress before going to the President for his signature. Conference reports can’t be amended.