Tags: mcconnell | banking | obama | reform | wall | street

Republicans Dig In Against Obama's War on Wall Street

Sunday, 18 Apr 2010 06:39 PM

WASHINGTON – Top Senate Republican Mitch McConnell vowed Sunday to oppose Barack Obama's finance industry reforms even if the president abandons plans to set up a $50 billion liquidation fund for failed banks.

Obama wants to crack down on Wall Street in the wake of the global economic meltdown by reining in executive bonuses, stamping out risky investments, and introducing tighter regulations under a new financial protection agency.

In a bid to bring Republicans on board, the Obama administration has offered to jettison the idea of a liquidation fund, even though the notion is that it would be paid for by the banks themselves to actually protect taxpayers.

McConnell has led opposition to the biggest US financial reforms since the 1930s by arguing that the fund would effectively encourage more taxpayer bailouts — a claim Democrats denounce as a bald-faced lie.

Despite an unusually direct attack from Obama in the president's weekly radio address calling the Republican leader's description of the bill "cynical and deceptive," McConnell refused to back down Sunday.

Sticking to his guns about the fund, the Senate minority leader went further, and in language reminiscent of recent partisan clashes over healthcare reform suggested the Democrats go back to the drawing-board.

"There are other problems with the bill," McConnell told CNN's "State of the Union" program, without specifying what those problems were.

"We need to get back to the table and get it fixed. I don't know anybody in the Senate who thinks we ought not to pass a bill. The question is, what's it going to look like?"

Republicans face the tricky task of trying to oppose this next chunk of Obama's reform drive while avoiding being portrayed by Democrats as in the pocket of unpopular Wall Street finance barons blamed for sparking the crisis.

Democrats, who have already passed regulatory legislation through the House, need to peel away at least one Republican vote to pass a bill in the Senate.

Democrats passed a reform bill out of the Senate Banking Committee without Republican support in a 13-10 vote, paving the way for a full Senate debate, expected as early as this week.

All 41 Senate Republicans have signed a letter to Democratic Senate Majority Leader Harry Reid saying they oppose the current legislation, which was drafted after months of bipartisan talks.

"We are united in our opposition to the partisan legislation reported by the Senate Banking Committee," they said in the letter Friday, which McConnell's office made public.

The letter stopped short of committing the signers to support a parliamentary delaying tactic called a filibuster to kill the bill, Obama's top domestic priority now that his historic health care overhaul is law.

Despite continued, blanket Republican resistance to the Obama agenda, Treasury Secretary Timothy Geithner told NBC's "Meet The Press" program he believed tough legislation would pass.

"I am very confident that we're going to have the votes for a strong package of financial reforms that'll bring derivative markets out of the dark (and) help protect the taxpayers from having to fund future bailouts."

Obama pledged Friday to veto any Wall Street reform bill that lacks tough new rules to regulate the trade of derivatives, a class of asset implicated in sparking the financial crisis.

His comments came on a day when his cause received a significant boost from news that leading Wall Street bank Goldman Sachs was charged with fraud in the sale of subprime mortgage-based derivatives.

Republicans have warned that, if the government imposes tough new regulations on derivatives, firms that want to trade in the instruments will simply look elsewhere than the United States.

Derivatives trading came under the spotlight early in the economic crisis, when it emerged that bundled-together mortgage products had a paper value that bore no resemblance to their true value.

The resulting losses blew a hole in the finances of banks such as Lehman Brothers, forcing them into bankruptcy and pushing others close to collapse.

Critics say the opaque trade in derivatives must now take place on open exchanges, where they can be more heavily regulated and scrutinized by investors.

© AFP 2015

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