WASHINGTON (AP) — Republican Senate leaders laid out a strategy Tuesday to alter or even reject broad changes in financial regulations. They said Democratic proposals would perpetuate bank bailouts, and they accused the Obama administration of exploiting anti-Wall Street sentiment for political purposes.
The criticism was an opening salvo as the Senate prepares to take up a sweeping overhaul of the nation’s financial regulatory regimen in less than two weeks. President Barack Obama planned to make his case for regulatory changes in a meeting Wednesday at the White House with congressional leaders from both parties.
Senate Republican Leader Mitch McConnell, in a floor speech Tuesday, said the bill approved on a party line vote by the Senate Banking committee “would provide endless protection for the biggest banks on Wall Street.”
And Sen. Judd Gregg, R-N.H., a member of the committee, said the administration’s insistence on a consumer protection agency was motivated by politics, not by sound policy.
McConnell’s speech laid out the fundamental Republican argument against the bill. It echoed the criticism from House Republicans last year, when the House passed its version of the bill on a straight party line vote.
“We must not pass the financial reform bill that’s about to hit the floor,” McConnell said. “The fact is, this bill wouldn’t solve the problems that led to the financial crisis. It would make them worse.”
Banking Committee Chairman Christopher Dodd, D-Conn., and the committee’s top Republican, Richard Shelby, R-Ala., continue to negotiate key sticking points in the legislation. Shelby on Tuesday echoed McConnell’s complaints about the bill but said he held out hope that a deal would be forthcoming.
McConnell’s speech seemed to serve more as leverage to give Shelby a stronger position from which to bargain than as an outright declaration of opposition. Some Republicans have argued that voting against a regulation bill could hurt them in the November elections.
Democrats need at least one Republican vote to overcome procedural hurdles facing the bill. Democrats and the administration, in public and in private, have expressed confidence that they will have the votes.
The GOP criticism provoked a sharp response from the White House. “No matter what the bill actually does, they’re going to call it a bailout because that’s what the polls tell them to do,” White House deputy communications director Jennifer Psaki said.
The White House has played a major hand in drafting the legislation, unlike the more hands off approach employed with health care.
Republicans complained Tuesday that Sen. Blanche Lincoln, D-Ark., the chairman of the Senate Agriculture Committee, abandoned negotiations with Republicans on complex commodity trading instruments under pressure from the White House. In a letter to four lawmakers on Tuesday, Lincoln laid out a proposal to address these transactions, called derivatives, by requiring all financial institutions to conduct them in regulated exchanges and promised tough standards with narrow exceptions.
The issue of whether the legislation would permit future bailouts has been in dispute for some time. Critics from the left and the right have argued that the Senate Democratic proposal would allow the government to step in and help ailing institutions in the future.
The legislation sets up a mechanism whereby large, intertwined financial institutions would be dismantled much in the same way the Federal Deposit Insurance Corp. takes over failing commercial banks. The legislation would require large institutions to pay into a $50 billion fund that would pay for at least some of the costs of taking down a giant firm. Democrats and advocates of the proposal say it is designed to liquidate firms, not to prop them up.
Republicans maintain that despite such a fund, taxpayers could still be on the hook. They prefer letting failing firms go through bankruptcy court.