WASHINGTON (Reuters) - Democrats pressed ahead with financial regulation reform in the Congress on Thursday, rejecting Republican complaints and preparing the way for a final vote on legislation in the Senate.
The last unfinished piece of a massive Democratic bill -- new rules for the $450 trillion over-the-counter derivatives market -- was expected to take clearer shape on Friday with the release of proposals from the Senate Agriculture Committee.
The OTC derivatives component is crucially important to Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America, which dominate the unpoliced market.
Lobbyists for the firms were on the defensive after it emerged that Agriculture Committee Chairman Blanche Lincoln planned to propose stricter rules than those approved by the Senate Banking Committee and the House of Representatives.
Senate Democratic Leader Harry Reid said the main Senate reform bill must accommodate Lincoln’s proposals.
“We hope to get it on the floor next week,” Reid told reporters at a briefing, referring to a final bill.
The House approved a sweeping reform bill in December. It would have to be merged with whatever the Senate produces before a final measure could go to President Barack Obama to be signed into law. Obama strongly favors reform.
The president will meet with economic advisers on Friday to discuss financial reform, including derivatives market oversight, a White House spokesman said, adding Obama was expected to make some public comments on Friday.
Addressing a Democratic fundraiser in Miami, Obama urged both parties to find common ground for reform and not let financial firms and their lobbyists kill the legislation.
“We should all agree that we’ve got to pass common-sense Wall Street reform that prevents the kind of situation that led us into this crisis in the first place,” he said.
Obama likened how financial institutions had attacked reform proposals to what happened from “throwing a piece of meat into a piranha tank.” “They’re going to race to see how fast they can tear it apart. But we cannot allow them to succeed.”
The top Agriculture Committee Republican criticized the proposals about to emerge from the panel on derivatives, including credit default swaps, which will seek to push more of those instruments through clearinghouses and exchanges.
Senator Saxby Chambliss said there was some bipartisan agreement on the basic need for writing rules for swaps, but he said disputes remained unresolved on which businesses must clear swaps, and how they would be reported and transacted.
“Unfortunately our bipartisan negotiations have now been halted,” Chambliss said, accusing the administration of intervening to stop the committee’ work.
The White House has said repeatedly it will oppose Republican attempts to weaken the Senate legislation. Republicans have worked closely for months to do just that with lobbyists for the banking industry and Wall Street.
Polls show bankers are deeply unpopular with voters after a severe financial crisis tipped the economy into a deep recession, hammering home values, jobs and retirement plans.
Democrats are betting that Republicans, eyeing congressional elections in November, will be reluctant to stand too closely at the banks’ side when the times comes for a vote in the Senate on tightening bank and capital market oversight.
“We still expect Congress to enact a moderate financial reform bill before the start of summer,” said policy analyst Jaret Seiberg at investment firm Concept Capital.
“As for timing, we believe this could go to the floor as soon as April 27. This date could easily slip. The real deadline is to pass it out of the Senate by Memorial Day.”
Additional reporting by Christopher Doering, Charles Abbott, Donna Smith, Patricia Zengerle, Emily Kaiser, Roberta Rampton, Richard Cowan, Karey Wutkowski, Thomas Ferraro and Matt Spetalnick; Editing by Peter Cooney