Advertisement

SKIP ADVERTISEMENT

Financial Overhaul Is Next Priority of Democrats

WASHINGTON — Buoyed by passage of landmark health care legislation, the Obama administration and Democrats in Congress said Wednesday that an overhaul of financial regulations was the next legislative priority.

The legislation appeared to be gaining momentum, as two crucial Republicans on the Senate Banking Committee, Judd Gregg of New Hampshire and Bob Corker of Tennessee, said they expected the overhaul to pass this year even though they had concerns about some provisions.

A Democratic strategy appeared to be emerging: expressing confidence that the measure would pass and urging Republicans to help shape legislation that they could support, rather than trying to block it.

“When we come back from recess, the No. 1 issue for the U.S. Congress will be this bill in the United States Senate,” Representative Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, said after meeting at the White House with President Obama.

The House voted along party lines in December to approve a regulatory overhaul similar to one proposed by the White House last summer.

Described as the most sweeping change in financial rules since the Depression, the legislation would create a council to detect and avert serious risks to the financial system.

It would also expand the Federal Reserve’s oversight over the largest and most interconnected financial companies, create an agency to regulate mortgages and credit cards, and regulate many of the over-the-counter derivatives that helped bring about the 2008 financial crisis.

Image
Representative Barney Frank, left, and Senator Christopher J. Dodd outside the White House. Credit...Doug Mills/The New York Times

The chairman of the Senate Banking Committee, Christopher J. Dodd, Democrat of Connecticut, who was at the White House meeting, said that Democrats were emboldened after Sunday’s health care vote by the House.

“There are Republicans I serve with in the Senate who frankly don’t want to just say ‘no policy’ when it comes to major legislative initiatives,” Mr. Dodd said. “And they would like to be part of this debate and offer constructive ideas to this proposal.”

He added: “So I’m much more optimistic. In light of what happened on health care, I think, frankly the outcome there I think has strengthened our hand in reaching out to people who would like to be part of the solution.”

The health care vote even prompted Mr. Frank to make a quip about the financial overhaul. “There are going to be death panels enacted by the Congress this year — but they’re death panels for large financial institutions that can’t make it,” he said.

Mr. Dodd’s committee sent the bill to the full Senate on Monday on a party-line vote, after Republicans decided it would be better to bring their amendments to the floor of the Senate and not try to hold up the bill in committee.

In contrast to the economic stimulus and the health care overhaul, where the White House outlined broad goals but largely left it to Congress to shape the legislation, the administration has been intensely engaged in drafting the legislation.

“The president expects that we will finish financial reform in the next couple of months, certainly by the time we mark the second anniversary of the financial collapse in the early fall,” Robert Gibbs, the White House press secretary, said.

The administration has been trying to make it difficult for the Republicans to vote no by tapping into populist resentment over the bank bailouts. “People are going to have an opportunity to weigh in on behalf of the banks or on behalf of consumers,” Mr. Gibbs said. “And I’ll let their vote on that dictate which side of that ledger they feel most comfortable on.”

Video
Video player loading
Sen. Christopher Dodd and Rep. Barney Frank address financial reform after speaking with President Obama on the topic.

The Democratic momentum appeared to be occurring amid a split in the Republican ranks.

Mr. Corker, who had negotiated with Mr. Dodd after an earlier round of talks between Mr. Dodd and the top Republican on the committee, Richard C. Shelby of Alabama, fell apart, said in a statement that “our hand has been weakened now that the bill has left the committee on a party-line vote,” calling it “a strategic error.”

The comments were an implicit criticism of Mr. Shelby, who met with Republican members of the committee in the afternoon to plan strategy.

The legislation that the Senate will take up after a two-week recess has critics on both sides.

While it would lead to higher capital requirements, stricter regulation and new limits on risk-taking by banks, it would not break up any large banks, as some critics from the left have urged.

Republicans and business associations have raised other objections. They are concerned about the scope of authority for the new consumer agency, as well as new rules governing the trading of derivatives and provisions intended to end the “too big to fail” phenomenon.

The United States Chamber of Commerce has spent $3 million on an advertising campaign opposing the consumer agency.

In a sharply worded speech to the chamber on Wednesday, the deputy Treasury secretary, Neal S. Wolin, criticized the campaign.

“That campaign is not designed to improve the House and Senate bills,” he said. “It is designed to defeat them. It is designed to delay reform until the memory of the crisis fades and the political will for change dies out.”

R. Bruce Josten, executive vice president of the chamber, later issued a statement accusing Mr. Wolin of “political grandstanding and distortion of facts.”

A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: After Health Care Win, Democrats Put Financial Overhaul at Top of Agenda. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT