WASHINGTON The tension level in the debate on U.S. financial reform rose on Thursday as Democrats slapped back at a Republican leader's comment about "punk staffers" and a pivotal vote neared in the Senate.
White House economic adviser Larry Summers and other Democrats criticized remarks made by House Republican Leader John Boehner, who told hundreds of bankers at a conference to be tough when lobbying against reform on Capitol Hill.
"Don't let those little punk staffers take advantage of you and stand up for yourselves," Boehner said on Wednesday.
He told the group that even if the Senate produces a bill to tighten bank regulation in the next few weeks, it could take a year to merge it with a bill approved in December. That measure passed without a single Republican vote in support.
In the latest sharp exchange between the White House and Republicans who are working to block reforms, Summers said, "I do not think that those who want to address these issues are 'little punk staffers' who need to be stood up to."
At a National Press Club event focused on the outlook for changes in financial regulation, the former Treasury secretary said the banking industry has spent about $1 million on lobbying per member of Congress in recent months, and has as many as four lobbyists per member working the issue.
"We in the administration do not believe that the prominent issue is allowing bankers to stand up for themselves," Summers said.
"Rather, we believe that the events of the last two years point something up that is profoundly problematic.
"The function of the financial system is to allocate capital. It is to diversify and distribute risk. It has in many respects performed that function very well. But all too often, a system that is designed to diversify and spread risk has instead been a source of risk."
President Barack Obama and congressional Democrats are trying to tighten bank and capital market oversight following the worst financial crisis in generations.
But regulation has barely changed almost two years since the near collapse of former Wall Street giant Bear Stearns and the downfall six months later of Lehman Brothers, which rocked markets worldwide and unleashed a global drive for reform.
The House of Representatives approved a sweeping bill in December that embraced most of many proposals made by Obama in mid-2009, but the slower-moving Senate has yet to act.
On Monday, the Senate Banking Committee will meet to debate, amend and move toward a vote on legislation that was unveiled earlier this week by its Chairman Christopher Dodd, the top Democrat in the Senate on financial regulation.
CORKER: WILL OPPOSE DODD BILL IN COMMITTEE
Republican Senator Bob Corker said he will not support the Dodd bill in committee and that he expects Democrats to approve it. Dodd has the votes to win passage for his measure at the committee level.
Approval would send the bill to the full Senate, where senators from both parties are expected to file a flurry of amendments attempting both to weaken and to harden the bill.
Its fate on the Senate floor looks uncertain, analysts said. Democrats control only 59 of the 60 votes that will be needed to overcome procedural hurdles sure to be thrown up by Republicans keen to block reforms.
House Democratic Leader Steny Hoyer, at the same industry conference where Boehner spoke, suggested bankers take a lobbying approach that is less confrontational than the one endorsed earlier by his Republican counterpart.
"Let me recommend to all of you who will be lobbying," Hoyer said. "Don't approach the staffer or member as if somehow they don't know what's going on and they are out to get you ... You want to figure out where their thinking is, and tell them how it is impacting your business," Hoyer said.
House Financial Services Committee Chairman Barney Frank, a Democrat and close ally of the White House on reform, said he wrote a letter to Boehner over his remarks.
"I am appalled that a leader of the House, who must know what good work is done by our staffs, would take such an inaccurate cheap shot at these people, for the purpose of ingratiating himself with bankers or any other group."
Also at the conference, attendees told Republican Senator Richard Shelby they view as unfair the Obama administration's proposal to set up a new government watchdog for financial consumers that would protect Americans from deceptive credit cards and abusive mortgage loans.
Asked what bankers could do to change the agenda, Shelby said, "What you can do is elect more Republicans to the U.S. Senate, that would help immensely." He asked each of the attendees to send $10,000 to Roy Blunt, a former House leader who is now running for Senate as a Republican in Missouri.
(Additional reporting by Caren Bohan and Mark Felsenthal, Editing by Chizu Nomiyama)