The tension level in the debate on U.S. financial reform rose on Thursday as Democrats slapped back at a Republican leader's comment about "punk staffers" and a pivotal vote neared in the Senate.
White House economic adviser Larry Summers criticized remarks made by House Republican Leader John Boehner, who said at a bankers' conference: "Don't let those little punk staffers take advantage of you and stand up for yourselves."
Boehner told the bankers on Wednesday that even if the Senate produces a reform bill in the next few weeks, it could take a year to merge it with a bill approved by the House in December. That measure passed with no Republican votes.
Summers, speaking at an event at the National Press Club, said, "I do not think that those who want to address these issues are 'little punk staffers' who need to be stood up to."
The former Treasury secretary also said the banking industry has spent about $1 million on lobbying per member of Congress in recent months, and has as many as four lobbyists per member working the issue.
"We in the administration do not believe that the prominent issue is allowing bankers to stand up for themselves," Summers said, urging Congress to act soon on reform legislation.
"Rather, we believe that the events of the last two years point something up that is profoundly problematic," he said.
"The function of the financial system is to allocate capital. It is to diversify and distribute risk. It has in many respects performed that function very well. But all too often, a system that is designed to diversify and spread risk has instead been a source of risk."
Boehner's remark, and Summers' response, marked the latest sharp exchange between the White House and Republicans who have worked closely for months with lobbyists for banks and Wall Street to try to weaken and block reform proposals.
President Barack Obama and congressional Democrats are trying to tighten bank and capital market oversight following the worst financial crisis in generations, which pushed the U.S. economy into a deep recession with global repercussions.
But regulation has barely changed almost two years since the near collapse of former Wall Street giant Bear Stearns and the downfall six months later of Lehman Brothers, which rocked markets worldwide and unleashed a global drive for reform.
The House of Representatives approved a sweeping bill in December that embraced most of many proposals made by Obama in mid-2009, but the slower-moving Senate has yet to act.
On Monday, the Senate Banking Committee will meet to debate, amend and move toward a vote on legislation that was unveiled earlier this week by its Chairman Christopher Dodd.
Republican Senator Bob Corker, also speaking at the press club, said he expects passage of the Dodd bill in the committee next week. Then there will be a struggle on the Senate floor over amendments, he said, adding he was still hopeful that the Senate will be able to approve final legislation.
Separately, presidents of regional U.S. Federal Reserve banks on Thursday defended their role in supervising small banks, and said ending it would cut a link between the central bank and the nation's heartland.
One of the Dodd bill's provisions would strip the Fed of its duty to supervise state-chartered banks with less than $50 billion in assets and shift that job to other regulators.
"It is a travesty," Kansas City Federal Reserve Bank President Thomas Hoenig said at the bankers' conference. "It is absolutely disenfranchising our relationship with a very important, hugely important sector outside of Wall Street across the United States."
House Democratic Leader Steny Hoyer, at the same industry conference where Boehner and Hoenig spoke, suggested bankers take an approach on Capitol Hill that is less confrontational than the one endorsed earlier by his Republican counterpart.
"Let me recommend to all of you who will be lobbying," Hoyer said. "Don't approach the staffer or member as if somehow they don't know what's going on and they are out to get you.
"They are trying to do the right thing. Their vision might be different from yours, and it may not be as informed as yours. You want to figure out where their thinking is and tell them how it is impacting your business," Hoyer said.
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