The US Senate has passed a bill providing the most sweeping overhaul of financial regulations since the 1930s.

The Senate passed the bill by 59 votes to 39. It must still be merged with a version in the House.

The bill creates new ways to watch for financial risks and makes it easier to liquidate large failing firms.

President Obama said Americans would never again pay "for Wall Street's mistakes" adding that Wall Street had tried but failed to scupper the bill.

Key points of the bill include: the creation of a new watchdog agency

restraints on larger banks, allowing them to take fewer risks

requiring borrowers to prove that they can pay back even the most basic of mortgages

giving the Federal Reserve the power to take control of large firms at risk of collapse - and break them up if necessary

reform of the complicated derivatives market.

Reconciling the bills

Democratic Party Senate Majority Leader Harry Reid said: "To Wall Street it says, 'No longer can you recklessly gamble away other people's money.'"

What does it all mean? In theory banks will be taking fewer risks - and they will certainly be less profitable Robert Peston, BBC business editor Read Robert's blog Q&A: US bank regulation details

The bill must still be reconciled with a version passed in the House of Representatives in December.

Although there is much common ground between the two bills, there are also some differences.

The Senate bill is in some ways more aggressive on issues such as the regulation of derivatives - complex financial instruments that are largely blamed for accelerating the Wall Street crisis - and executive pay.

It says that banks would have to spin off their derivatives business, while the House bill would not require them to do so.

The Senate would also allow the Federal Reserve to set standards on what it deems excessive compensation. Under the House's bill, regulators would have a say on compensation practices, but not on pay itself.

Analysis There will be be more haggling and further votes before the bill becomes law, but this was a crucial moment. Opinion is sharply divided over the bill's merits. Executives at financial companies have been very critical of it, but some on the left of the Democratic Party say it doesn't go nearly far enough in changing the culture of Wall Street. Nonetheless Mr Obama is seeing another key piece of his domestic policy plan fall into place and his administration, at home at least, really seems to be gaining momentum now.

The House bill goes further on consumer protection, calling for an independent Consumer Financial Protection Agency, whereas the Senate would create a Consumer Financial Protection Bureau within the Fed.

Barney Frank, head of a key House panel, said that he thought Mr Obama might be able to sign a bill into law before the 4 July holiday.

The president earlier said the financial industry had repeatedly tried to block the regulatory reforms, using lobbyists, millions of dollars in advertising and special interest "loopholes".

"Today, I think it is fair to say these efforts have failed," he said, in a statement in the Rose Garden of the White House.

'Decades to come'

The bill's progress had been stalled by some Republican leaders who did succeed in making some amendments.

Republican Senator Richard Shelby, who opposed the legislation, said: "The decisions we've made will have an impact on the lives of Americans for decades to come.

"Judgement will not be rendered by self-congratulatory press releases, but, rather, by the marketplace. And the marketplace does not give credit for good intentions."

On Wednesday, Republicans, aided by two Democrats, had blocked a final Senate vote on the bill.

But on Thursday, a vote to end debate on the bill was passed by 60-40, the minimum needed to succeed.

There is widespread public support for tightening the regulation of Wall Street.

European taskforce

Meanwhile, European finance ministers are meeting in Brussels later to discuss ways to prevent another crisis like the one in Greece.

They will look at Germany's unilateral ban on naked short-selling, as well as future co-ordination of such market-moving decisions.

Also on the agenda will be changes to EU budget rules, with one idea being to look at national budget proposals in the first six months of the year instead of the second six months.

Although they will be hoping to reach a consensus, the issue of tightening economic policy co-ordination could prove divisive.