Emboldened by the fraud allegations against giant Goldman Sachs & Co., the Obama administration and Senate Democrats will push for a showdown this week on their sweeping overhaul of financial regulations — a confrontation that echoes the epic battle over healthcare.
President Obama is traveling to Manhattan on Thursday to deliver a major speech urging passage of the reforms, with the fate of the legislation likely to hinge on framing an issue that resonates with voters still dealing with the fallout from the deep recession.
Democrats accuse Republicans of siding with Wall Street to block new rules that could avert another financial meltdown. Republicans accuse Democrats of setting taxpayers up for more bank bailouts down the road.
“This comes down to this basic question: Whose side are you on?” Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) said Monday in a taste of the coming fight. “Are you on the side of those who oppose this?”
Large financial institutions and some business groups, led by the U.S. Chamber of Commerce, oppose key provisions of the legislation and have been lobbying aggressively against it for months. Republicans, at least so far, are presenting a unified front of opposition as supporters of the legislation have amped up their efforts in the last week.
So once again, Democrats face the prospect of a filibuster in the Senate, but this time they can’t even get their plan to the floor without at least one Republican vote.
With all 41 Republicans signing a letter last week vowing to oppose the bill as it stands, Democrats are all but daring them — particularly moderates such as Maine’s Susan Collins and Olympia Snowe — to vote against bringing the bill up for debate Wednesday or Thursday.
After meeting privately with Treasury Secretary Timothy F. Geithner on Monday, Collins said she was not budging.
Although optimistic about the prospects for a bipartisan financial regulatory bill, Collins said it would take a few weeks, not days, to get there. She promised to join fellow Republicans in voting to block the bill from coming to the Senate floor this week if it is the same “partisan bill” approved by the Senate Banking Committee.
“We need more time for … negotiations to take place,” she said.
But Democratic leaders aim to force the issue. They are trying to seize on the Securities and Exchange Commission’s civil suit against Goldman Sachs on Friday as an example of Wall Street abuses that need to be curbed by tough new regulations.
“The Democrats feel they have momentum, and it makes all the political sense in the world to force a vote,” said Jaret Seiberg, a financial policy analyst at Concept Capital’s Washington Research Group. “That doesn’t mean we’re not going to get a political compromise. That’s still likely. But it’s going to take the threat of a vote to force a deal.”
The White House and Senate Democrats have been encouraged to push for a quick showdown on the legislation by polls showing that there is much more public support for cracking down on Wall Street than there was for healthcare reform. That would make it harder for GOP criticism to turn the public against Obama and his plan.
Another source of political pressure is the dissatisfaction of many liberal Democrats who believe the financial overhaul bill is not tough enough, making it difficult to make changes to lure Republican support.
Dodd said the Democrats’ legislation would have prevented what he called the “shenanigans” by Goldman and other firms that led up to the crisis.
But White House Press Secretary Robert Gibbs said there was “plenty of evidence” already of the need for major changes to financial regulations. Obama will make that case Thursday in a speech in New York City.
“We are approaching … the second anniversary of this collapse, and I think the American people want us not to play politics with this important issue but, instead, to get something done,” Gibbs said.
The overhaul aims to prevent future economic crises by tightening government oversight of financial firms, regulating the complex derivatives market for the first time, creating an agency to protect consumers in the financial marketplace and granting the government broad new powers to seize and dismantle huge financial firms on the brink of failure should their collapse threaten the economy.
The House passed a similar bill in December without a single Republican vote. And with the legislative clock ticking down, the Senate must pass its bill in the coming weeks if there is any hope of resolving differences with the House and enacting the legislation before November’s mid-term elections.
The administration and its allies have been pushing hard in recent weeks to increase the pressure on Republicans to support the bill.
Seniors advocacy group AARP launched ads Monday supporting the legislation, joining efforts by consumer groups as they try to counter an aggressive push against it by the U.S. Chamber of Commerce.
Geithner has been lobbying key senators. In addition to Collins, he was to meet with Snowe later Monday. Last week, Geithner sat down with Sen. Scott Brown (R-Mass.), who is viewed as a potential supporter.
Brown raised concerns about the bill’s effect on small banks and small businesses and about the additional regulation it would impose, said Brown’s press secretary, Gail Gitcho.
“He went into the meeting with those concerns and left the meeting with the same concerns,” Gitcho said. “He did not come away as a supporter.”
Administration officials have said they are optimistic the Senate will pass a bipartisan financial overhaul bill. But even as Democratic leaders tried to push the legislation through the Senate without major changes, Dodd said Monday he was open to jettisoning a key provision that has sparked controversy.
As part of the proposed government authority to step in and shut down large financial firms on the verge of bankruptcy, Dodd’s bill contains a provision for a $50-billion fund to help cover the government’s costs during such a forced shutdown.
The largest financial firms would have to pay into that fund in advance so it would be in place should the government need it, preventing taxpayer money from being put at risk. Senate Republican Leader Mitch McConnell (R-Ky.) and others in his party have blasted that provision, saying it would be a permanent bailout fund that would be used to save companies.
Dodd countered by saying that the idea to have firms pay into the fund in advance of a failure came from a Republican and that he was willing to consider changing it. The provision was not in the White House version of the legislation, which it sent to Congress last year. The House added a $150-billion fund in its bill.
Collins said she opposed the $50-billion fund and that Geithner “indicated a willingness” to drop it from the legislation.