WASHINGTON (Reuters) - The White House on Tuesday published a list of financial reforms it means to defend against Wall Street lobbyists in the Senate but omitted a tough provision that has drawn criticism from prominent banking regulators.
The provision, absent from a White House top-10 list of measures targeted by Wall Street and its legislative allies, would effectively require banks to spin off their lucrative swaps desks as part of a crackdown on the $450 trillion derivatives market.
In a blog posted on its official website, the White House accused financial industry lobbyists of “working overtime” to weaken consumer protection and dilute efforts to regulate financial derivatives as part of the most sweeping overhaul of banking rules since the Great Depression,
Banks, which reap huge profits in the derivatives market, have attacked the swaps proposal. Federal Deposit Insurance Corp Chairman Sheila Bair and Comptroller of the Currency John Dugan have also expressed concern about the measure’s potential impacts on government oversight and bank capital, respectively.
Administration officials have remained silent on the proposal and analysts say it will probably be dropped from the bill as the Senate debates amendments over the next two weeks.
Financial reform is the Obama administration’s top legislative agenda and Democrats hope to use public anger toward Wall Street to drive reforms forward in Congress. The reform issue could also help Democrats retain control of Congress in the November elections.
Tuesday’s blog, authored by White House Communications Director Dan Pfeiffer, predicted Wall Street lobbyists would push the following “loopholes” as amendments to Senate legislation now under consideration:
* Prevent the bill from giving state attorneys general the authority to impose consumer financial protections on banks and other financial institutions;
* Exempt auto dealers, department stores and other providers of financial services from consumer protection rules;
* Restrict funding for the proposed Bureau of Consumer Financial Protection and limit the agency’s ability to establish clear rules for the consumer financial marketplace;
* Take away the ability of state governments to add their own additional protections to new federal consumer finance rules;
* Eliminate a provision requiring financial derivatives to be traded on exchanges or other electronic trading platforms;
* Apply a derivatives trading exemption meant for nonfinancial companies to hedge funds and other financial entities;
* Do away with a measure to designate large non-bank financial companies such as American International Group Inc for tougher supervision by the Federal Reserve;
* Protect insurance companies from provisions requiring them to provide information to the U.S. Treasury Department;
* Do away with requirements that would make mortgage companies retain a stake in the loans they sell or securitize;
* Make the federal government’s authority to shut down big failing financial firms too complicated to work.
Reporting by David Morgan and Andy Sullivan, editing by Gerald E. McCormick