WASHINGTON (Reuters) - President Barack Obama and top Republicans faced off on Wednesday over a Democratic plan in the Senate to crack down on Wall Street.
After talks in the White House, Republicans ripped into a Democratic reform bill, saying it would protect big banks, hurt small banks and guarantee “endless taxpayer bailouts of Wall Street.”
Democrats blasted back that the Republican attack was “completely unhinged from reality” and defended the bill as an attempt to put a stop to excesses and bailouts like the ones improvised in 2008 under Republican President George W. Bush.
Both sides said a bipartisan package could still be worked out, but amid the rhetoric, there was little sign that either gave ground on the reform plan at the White House talks.
“If there is one lesson that we’ve learned, it’s that an unfettered market where people are taking huge risks and expecting taxpayers to bail out when things go sour is simply not acceptable,” Obama said.
Democrats want tighter oversight of derivatives markets and protections for consumers from abusive mortgages, among other restraints, but they need the support of Republican lawmakers to push a bill through the full Senate.
Republicans have worked closely for months with bank and Wall Street lobbyists to weaken and block Democrats’ proposals in a fight that was overshadowed by healthcare reform.
Now that he has won a major victory on that front, Obama is making financial reform his top legislative priority. The issue is shaping up as a battleground for the November congressional elections, when Democrats hope to tap into widespread popular anger at Wall Street.
The White House declined to give a specific timeline for passing reform, but said it was “untenable” that Congress could end its session this year without taking action.
White House spokesman Robert Gibbs told reporters in a news briefing: “I quite frankly think that there will be a decent number of Republicans (who) will be on the side of reform.”
A vote on financial reform is expected soon in the Senate. Senate Republican Leader Mitch McConnell slammed the bill.
“It will lead to endless taxpayer bailouts of Wall Street,” he said after talks with Obama, House Republican leader John Boehner, Senate Democratic Leader Harry Reid, House of Representatives Speaker Nancy Pelosi and House Democratic leader Steny Hoyer.
Boehner told reporters: “My concern is that it protects the biggest banks in America and harms the smallest banks.”
Obama administration officials have argued that passing a reform bill is crucial to preventing a repeat of the 2008-2009 financial crisis that tipped the U.S. economy into its worst recession in decades, unleashing a global push for reforms.
The Republicans’ criticisms about bailouts are “completely unhinged from reality,” said Democratic Senator Sheldon Whitehouse at a briefing with reporters.
“The American people want to end bank bailouts and that’s precisely what the ... bill aims to do,” he said. “It’s the height of hypocrisy for the Republicans to refer to a bill designed to end bailouts as a ‘bailout bill.’”
Policymakers around the world are revising financial regulations affecting banks, insurers, hedge funds, exchanges, derivatives markets and asset management companies. Much of the international focus is on imposing a new tax on banks.
IMF BANK TAX REPORT SOON
The International Monetary Fund is expected to make recommendations to G20 finance ministers in 10 days on forcing banks to contribute toward future bailouts. Obama has already proposed a bank levy, as have Britain, France and Germany.
JPMorgan CEO Jamie Dimon on Wednesday hit back at Washington as his firm reported profits that beat forecasts, underscoring a Wall Street comeback. Dimon groused about an Obama proposal to recoup taxpayer bailout costs through a $90 billion “financial crisis responsibility fee.”
“Let’s all not call it a bank fee, and call it what it is, which is a punitive bank tax,” Dimon told a conference call.
Republicans have seized on a part of the Senate bill that would empower regulators to dismantle in an orderly way big financial firms that get into trouble. The idea is to prevent costly bailouts like the Bush administration’s rescue of AIG, while averting disastrous bankruptcies like Lehman Brothers’.
The “orderly liquidation” plan, Republicans say, would allow more bailouts by preserving the potential for the U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. to step in to stabilize the financial system.
After meeting with Obama, Reid told reporters: “It’s obvious that the Republicans are saying ‘no’ again to progress for America. We’re going to move forward just as rapidly as we can with the bill.”
In the November elections, all 435 House seats and more than a third of the 100 Senate seats are up for grabs.
The House in December approved a sweeping financial reform bill, with no Republicans voting in support. It embraced many of changes first proposed by Obama in mid-2009.
Additional reporting by David Morgan, Thomas Ferraro, Karey Wutkowski, Ross Colvin, Steve Holland and Patricia Zengerle; Editing by Cynthia Osterman
Our Standards: The Thomson Reuters Trust Principles.