Dems to GOP: ‘Go ahead, make our day’

Democratic Senators Christopher Dodd and Mark Warner (AFP)

With a showdown vote looming, Democrats are resisting Republican appeals for a broad compromise on financial overhaul legislation and are eager to test whether GOP unity will crack in an anti-Wall Street political climate.

The top negotiators on the regulatory bill — Democratic Sen. Christopher Dodd and Republican Sen. Richard Shelby — professed to be close to a deal during a joint appearance on NBC’s “Meet the Press.”

But Shelby conceded that “inches sometimes are miles,” and the two did not hold a negotiating session Sunday.

The legislation is the most sweeping effort to rein in financial institutions since the Great Depression. Aimed at avoiding a recurrence of the near collapse of the financial system in 2008, it would create a mechanism for liquidating large firms that get into trouble, set up a council to detect systemwide financial threats and establish a consumer protection agency to police lending. The legislation also would require derivatives, blamed for helping precipitate the meltdown, to be traded in open exchanges.

The House already passed its version of the legislation.

Senate Republican Leader Mitch McConnell on Friday blocked Democrats’ efforts to bring the bill up for debate, setting up a vote Monday that will require 60 votes to move ahead. McConnell and Shelby said Sunday that without a deal with Dodd, all 41 Republican senators would vote to stall the start of debate. Shelby said a deal in time for the vote was unlikely.

But unlike the health care debate, public sentiment was not working in favor of Republicans. Public opinion is leaning toward more regulation of large financial institutions, and a Securities and Exchange Commission lawsuit alleging fraud by Goldman Sachs has added the cloud of scandal to Wall Street.

On Sunday, Dodd agreed to toughen his overarching bill with stronger rules on derivatives, including one that had drawn objections from the Obama administration, according to a Democratic official familiar with the negotiations. Dodd entered into a tentative deal with Agriculture Committee Chairwoman Blanche Lincoln, D-Ark., to incorporate her committee’s derivatives provisions into the broader regulatory legislation. At least two Republicans — Sens. Charles Grassley of Iowa and Olympia Snowe of Maine — are on record supporting Lincoln’s derivatives package.

Derivatives are the complex securities blamed for helping precipitate the 2008 Wall Street crisis.

One of the most sweeping of Lincoln’s restrictions would require banks to spin off their derivatives business into subsidiaries with a separate source of capital. Large banks fiercely opposed the provision. The Obama administration has called for banks to end trading in speculative securities but not to jettison operations that create derivatives markets for clients.

In yet another attempt to attract Republicans, Democrats appeared willing to jettison from the bill a $50 billion fund — financed by large banks — that would have been used to liquidate failing firms once considered “too big to fail.” The fund has been one of the main targets of GOP criticism.

Democrats said the time had come to move on with the bill.

“Are we going to start the debate or are we going to shut it down and continue negotiating, negotiating, negotiating?” Sen. Sherrod Brown, D-Ohio, asked on ABC’s “This Week” Sunday.

For now, Republicans are using the only leverage they have — the threat of 41 unified votes — to seek a bigger GOP imprint on the bill.

The impasse reflects differences over how to contain large, interconnected financial firms and how to liquidate them when they fail. But Democrats and Republicans also differed on how to protect consumers and how to set limits on previously unregulated exotic instruments such as derivatives.

Dodd has already incorporated a number of Republican ideas into his version of the bill following negotiations with Shelby and Republican Sen. Bob Corker of Tennessee. Democrats, particularly liberals, have become increasingly worried that a compromise with Shelby will limit their ability to amend the bill during floor debate.

Dodd tried to reassure them.

“We can’t take care of everything in the bill,” he said, referring to his talks with Shelby. “Obviously our colleagues will want to be heard.”

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Obama seeks to smear Republicans with Wall Street slime

(AFP)

The White House on Monday sought to tar Republicans with Wall Street excess, as President Barack Obama cranked up his campaign to quickly pass the most sweeping regulatory reform law in decades.

Aides said Obama will venture into the heart of the US financial capital in New York to make a major speech on Thursday on measures designed to purge high-risk and bloated corporate practices blamed for unleashing a meltdown.

Treasury Secretary Timothy Geithner was meeting two key Republican senators as the administration searched for one or more extra votes needed to pass a Senate bill, over the complaints of the opposition party’s leaders.

Fraud charges leveled against Goldman Sachs meanwhile underscored the alleged finance industry excess the White House is targeting, though officials said they had no prior notice the Wall Street titan was under investigation.

Obama will Thursday make a speech at Cooper Union, a college a few miles from the epicenter of the US finance industry, stepping up a campaign to enact what is billed as the most important regulatory reform law since the 1930s.

“Almost two years after the crisis hit and almost one year after the administration first laid out a detailed plan for holding Wall Street accountable and protecting consumers, (Obama) will call for swift Senate action,” White House spokesman Robert Gibbs said.

“The crisis has already wiped out trillions of dollars in family wealth and cost over eight million jobs.

“The president will also remind Americans what is at stake if we do not move forward with changing the rules of the road as a part of a strong Wall Street reform package.”

Political debate over Obama’s financial reform drive is being colored by looming mid-term congressional elections in November.

Republicans face the tricky political task of opposing this next chunk of Obama’s domestic reform drive while avoiding being portrayed by Democrats as in the pocket of Wall Street finance barons blamed for sparking the crisis.

Democrats last week accused Republican Senate minority leader Mitch McConnell of grossly misrepresenting the bill, but he took to the Senate floor Monday to accuse his foes of scuppering efforts for a bipartisan compromise.

“It seems to me that a far more efficient way of proceeding is to just skip the character attacks on anyone who dares to point out flaws with the bill,” McConnell said.

“Forget the theatrics, and get to work.”

But Gibbs sought to frame McConnell as a friend of Wall Street bankers, rather than American voters struggling after the worst recession in decades.

“I don’t know whether Senator McConnell is interested in putting Wall Street in charge or putting the American people back in charge, but… he’ll have a chance to register whose side he’s on later on this month.”

In a bid to attract some Republican support, the administration has offered to jettison the idea of a liquidation fund, that would be paid for by top banks themselves to actually protect taxpayers.

Republicans have argued that the fund would effectively encourage more taxpayer bailouts — a claim denounced by Democrats as deliberate misinformation.

Geithner met Maine senator Susan Collins, a centrist Republican who could represent a swing vote. Collins called for more negotiations on a bipartisan compromise bill.

“I expressed to the secretary my opposition to the partisan (Democratic) bill,” Collins told reporters.

“But I also told him of my belief that we can work work out a truly bipartisan bill that will strengthen our financial system.”

All 41 Senate Republicans signed a letter last week pledging to oppose the bill in its current form.

The first formal public clash on the bill is likely come later this week with a Senate test vote on financial reform.

Powerful Democratic Banking Committee Chairman Chris Dodd suggested fraud charges leveled against Goldman showed the need for new industry rules.

Without naming Goldman, Dodd cited “a legal matter” affecting “a major investment firm in New York” and stressed: “Our bill would have prevented that kind of event from happening, in my view.”

Gibbs meanwhile said that the White House had no idea last week that the Securities and Exchange Commission, an independent agency, was preparing the charges.

Obama first laid out a version of Wall Street reform at Cooper Union during his presidential election campaign in 2008.

Last September, Obama traveled to within a few blocks of the US Stock Exchange to warn Wall Street bosses were ignoring lessons of the financial crisis, and demanded a new age of prudence after years of unchecked excess.

Obama gave a preview of the tone of this week’s remarks on Saturday, in his weekly radio and online address.

“We will hold Wall Street accountable. We will protect and empower consumers in our financial system. That’s what reform is all about,” he said.

“If we don’t change what led to the crisis, we’ll doom ourselves to repeat it. That’s the truth,” the president warned. “Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again.”

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