Obama presses for financial reform, ads slammed

By Kevin Drawbaugh

WASHINGTON (BestGrowthStock) – Financial regulation reform vaulted to the top of President Barack Obama’s post-healthcare agenda on Wednesday, with both Democrats and Republicans upbeat about passing legislation soon.

After a meeting with Obama, Senate Banking Committee Chairman Christopher Dodd said the president wants results soon from Congress on proposals to tighten U.S. government oversight of banks and the capital market.

A year and a half since a severe financial crisis tipped the economy into a deep recession, unleashing reform efforts worldwide, the Senate has yet to act on a raft of proposals from Obama. The House has already approved a bill.

“We’re going to get a bill done,” Dodd told reporters outside the White House. He was joined by fellow Democrat Barney Frank, chairman of the House Financial Services Committee who said the issue will be Congress’ No. 1 concern after a two-week Easter break.

Democrats will be hard-pressed to assemble the 60 votes likely to be needed to get a bill through the Senate, but analysts said odds still favored the approval of reform legislation this year.

Dodd’s committee approved a sweeping Democratic reform bill on Monday with no support from Republicans, moving it toward the Senate floor, but Dodd said he will make one last stab over the recess at finding a compromise with Republicans.

Republican Senator Bob Corker, who tried but failed to reach a deal with Dodd in February, said in a statement, “I am still hopeful that we can get to a regulatory reform bill that can receive strong bipartisan support.

“Our hand has been weakened now that the bill has left the committee on a party-line vote,” Corker said.

Pivoting from their victory this week on healthcare reform, Democrats are pushing hard for a crackdown on risky bank practices, over-the-counter derivatives, credit rating agencies and other segments of the financial sector, with the aim of preventing another crisis.


Deputy Treasury Secretary Neal Wolin blasted the U.S. Chamber of Commerce for what he called a “lavish, aggressive and misleading” $3 million advertising campaign designed to block financial reforms.

Speaking to the business group, Wolin said, “That campaign is not designed to improve the House and Senate bills, it is designed to defeat them.”

He said the ad campaign, as well as the expenditure of about $1.4 million per day on anti-reform lobbying and campaign contributions by big banks and Wall Street firms, represented one of the costliest special interest campaigns in history.

“We believe that the fight against financial reform is shortsighted and misguided,” Wolin said.

A key objective of Democrats is to set up a new way to shut down distressed financial giants, averting the need for more on-the-fly bailouts like the ones the Bush administration engineered for firms such as AIG (AIG.N: ) and Citigroup (C.N: ).

The political backlash from those taxpayer-funded rescues is still registering and crosses party lines. Polls show wide resentment among voters over bailed-out firms returning to hefty profits and paying generous bonuses to executives.

Obama, at the meeting with Dodd and Frank, reiterated a commitment to working to strengthen reforms and to fight attempts to weaken a proposal to set up a financial watchdog for consumers, a White House official said.

Banks and Wall Street firms have fought hard for months to weaken or kill reform proposals introduced in mid-2009 by Obama. Republicans have sided with the banks despite polls showing that the financial sector is deeply unpopular.


With November elections approaching, Democrats are betting that Republicans will want to put some distance between themselves and Wall Street by supporting legislation that analysts say could be on Obama’s desk by May or June.

Legislation should include some form of the “Volcker rule,” which would limit large financial firms’ ability to engage in proprietary trading, Thomas Hoenig, president of the Kansas City Federal Reserve Bank, said on Wednesday.

Hoenig, among a few Fed officials to openly call for breaking up banks seen as too big to fail, said mammoth investment conglomerates have not served the economy well.

“Adopting a version of the proposed Volcker rule would be healthy for long-term stability,” he said at a conference.

The “Volcker rule” was unveiled in January by Obama and White House economic adviser Paul Volcker, a former chairman of the Federal Reserve.

It would curb banks’ ability to buy and sell investments using their own capital unrelated to customers’ needs, bar them from sponsoring hedge funds and limit their future growth with a new liabilities-based market share cap.

Senate Agriculture Committee Chairman Blanche Lincoln shed new light on her thinking about how to regulate the largely unpoliced, $450 trillion OTC derivatives market.

Lincoln’s panel is developing a bill that will have to be merged ultimately with parallel measures from both Dodd’s and Frank’s committees as well as the House agriculture panel.

Her comments sounded less restrictive than Dodd’s or Frank’s. Derivatives have been blamed for worsening the economic turmoil in late 2008.

“The swaps market will be regulated, but let me say this — I don’t believe in over-reaching or regulation for regulation’s sake. We must be surgical in how we regulate,” Lincoln said.


(Additional reporting by Rachelle Younglai, Karey Wutkowski, Charles Abbott, Roberta Rampton, Christopher Doering and Pedro Nicolaci da Costa, with Huw Jones in London and Matthias Sobolewski in Berlin; Editing by Kenneth Barry)

Obama presses for financial reform, ads slammed