With the Senate now facing a Monday deadline to take up a financial-regulation bill, President Obama on Thursday traveled to Wall Street’s backyard to plead with bankers to stop fighting his efforts and get on board with tougher rules aimed at preventing another financial meltdown.
As Mr. Obama stepped up his cheerleading efforts before a crowd at New York’s Cooper Union, the Senate continued negotiations over the overhaul. Majority Leader Harry Reid, Nevada Democrat, has scheduled a procedural vote for Monday over the protests of several Senate Republicans, who said they were nearing agreement on the legislation with Senate banking committee Chairman Christopher J. Dodd, Connecticut Democrat and the bill’s author.
Mr. Obama said he supports the nation’s free-market system but warned that new curbs are needed for the good of consumers and businesses. He said legislation must give regulators the power to break up troubled firms, ensure that financial products such as derivatives are traded in public, protect customers from being “duped” and give more power for shareholders to dictate the terms of compensation and elections of executives.
The president stayed away from telling senators how to achieve those objectives. It’s the same tactic he took on health care, in which he set out overarching goals but left the legislative minutiae to Congress.
Mr. Obama reiterated Thursday that he supports the nation’s free-market system but said it needs common-sense curbs that would benefit businesses and consumers.
“I believe in the power of the free market. I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings,” Mr. Obama told the audience, which included union leaders, regulators and elected officials. “But a free market was never meant to be a free license to take whatever you can get, however you can get it. That’s what happened too often in the years leading up to this crisis.”
Mr. Obama’s remarks were not as provocative as they have been in the past - such as when he referred to bankers as “fat cats” - but he chided Wall Street for forgetting that “behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business or save for retirement.”
Republicans argue that Mr. Dodd’s $50 billion “liquidation” fund, to be financed by a fee on the nation’s biggest banks, means the government is still on the hook to bail out big banks.
Mr. Obama said the argument makes for a good sound bite but is “not factually accurate.”
The Senate bill, though it does not go as far as a House bill that passed last year, generally would give the government more power to break up troubled firms and create a consumer-protection entity inside the Federal Reserve.
The White House and Senate Democrats have been looking for Republican backers of the bill because they need at least one member of the GOP to join their 59 votes to overcome procedural hurdles. Sen. Richard C. Shelby of Alabama, the senior Republican on the Banking, Housing and Urban Affairs Committee, is in talks with Mr. Dodd and has said he is optimistic they can strike a deal, but Mr. Reid’s push to schedule a vote as soon as possible has thrown a wrench into those discussions.
Democrats said Republican votes against new regulations will show they are siding with businesses over consumers.
“That is the decision that we have to make in this legislation as we go forward on regulatory reform: Are you with America’s families, or are you with the credit card companies and the banks?” said House Speaker Nancy Pelosi, California Democrat.
House Republicans, meanwhile, have been stepping up their own efforts to define the flaws in the House and Senate Democratic bills.
Their chief complaint is that neither bill reforms government-sponsored enterprises Fannie Mae and Freddie Mac, whose flawed loan portfolios the GOP blames for igniting the financial collapse.
“I’m going to be astoundingly disappointed in my Senate colleagues if they don’t have something on Fannie and Freddie,” said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee.
White House critics have suggested that a Securities and Exchange Commission investigation into Goldman Sachs’ role in the mortgage meltdown was purposefully timed to coincide with the push for financial reform. The administration has adamantly denied that accusation.
The administration also took heat this week after former White House counsel Gregory Craig, now in private practice in Washington, was retained by the Wall Street titan. The White House said it was not consulted about the move, which some say raises ethics concerns owing to the administration’s two-year ban on lobbying.