WASHINGTON — Congress today passed the toughest restrictions on U.S. financial institutions since the Great Depression in an effort to prevent a repeat of the 2008 economic meltdown.

The financial reform bill cleared its final hurdle with a 60-39 Senate vote, according to the Associated Press. It now goes to the White House for President Obama’s signature, expected as early as Wednesday.

The law will give the government new powers to break up companies that threaten the economy, create the Consumer Financial Protection Bureau to guard consumers in their financial transactions, and shine a light into shadow financial markets that escaped the oversight of regulators.

“Because of this reform, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Obama said this afternoon. “There will be no more taxpayer-funded bailouts – period.”

Maine Sens. Olympia Snowe and Susan Collins were among only three Republicans who voted for the bill, along with Massachusetts Sen. Scott Brown. Democratic Sen. Russ Feingold of Wisconsin, who has said the bill is not tough enough, voted with most Republicans against it.

Snowe is the ranking member of the Senate Committee on Small Business and Entrepreneurship and a senior member of the Senate Finance Committee. She described the bill as “not perfect (but) a strong step forward to achieve meaningful regulatory reform and restore confidence in the American financial system.”

“It is clear we can no longer continue with the status quo on Wall Street,” Snowe said following the vote. “Today, the Senate finally acted in a bipartisan fashion to advance a (bill) that will ensure the continued safety and soundness of the American financial regulatory system.”

Snowe said the legislation guarantees transparency and accountability and provides vital protections from the “greedy and reckless Wall Street practices that contributed to this epic economic downturn.”

A core provision of the bill creates a council of regulators, the Financial Stability Council, to serve as a systemic-risk monitor, similar to legislation that Collins introduced in March 2009.

“This council will identify financial institutions, practices and products that pose a risk to financial markets or to our economy,” Collins said. “This council will help prevent regulatory ‘black holes’ and ensure more effective oversight of our financial system.”

In particular, Collins said, the council will target lax mortgage lending standards and the explosive growth of credit default swaps that helped to trigger the latest economic crisis.

The legislation also gives the federal government tools to ensure that the failure of a single private institution won’t wreak havoc on the world’s financial system and drive the economy into recession, Snowe said.

“This bill implements a strong derivatives regulation that will push the vast derivatives-trading market onto transparent exchanges, eliminating any chance that taxpayer money will be used to support misplaced bets,” Snowe said.
 
Snowe authored four amendments to the bill that were designed to temper burdensome community bank regulations and improve access to credit for small businesses. All were approved by unanimous consent and included in the measure.

The legislation also includes an amendment authored by Collins that aims to strengthen capital requirements for large financial institutions.

“It is critical that large institutions be required to have adequate capital to prevent future taxpayer bailouts and to tackle the ‘too big to fail’ problem,” Collins said. “This will strengthen the economic foundation of these firms and help prevent future economic crises.”

Collins said she is disappointed that, despite her efforts, the bill fails to address the “dysfunctional operations” of Freddie Mac and Fannie Mae, which were major contributors to the collapse of the nation’s housing market.

“Congress must tackle the reform of Freddie and Fannie in subsequent legislation,” Collins said.

However, few financial players are immune to the bill’s reach, from storefront payday lenders to the biggest banking and investment houses on Wall Street.

Consumer and investor transactions, whether simple debit card swipes or the most complex securities trades, face new safeguards or restrictions.

Large, failing financial institutions would be liquidated and the costs assessed on their surviving peers. The Federal Reserve is getting new powers while falling under greater congressional scrutiny.

Borrowers are to be protected from hidden fees and abusive terms, but also will have to provide evidence that they can repay their loans, thus halting the no-document loans that had flooded the markets.