President Obama speaks during a meeting on financial reform at the White… (Jewel Samad / AFP/Getty…)
Reporting from Washington — President Obama made a forceful new push Wednesday for a sweeping overhaul of financial regulations to avert future economic catastrophes, but the long-sought legislation is in danger of stalling amid a gathering Capitol Hill firefight similar to the bitter healthcare battle.
The proposed overhaul, which has moved to the top of Democrats' legislative agenda, is a far-reaching effort to give federal regulators power to prevent another financial crisis and tackle the problem of institutions deemed "too big to fail."
The bill is designed to respond to voters' outrage at Wall Street practices that many believe contributed to the near collapse of the U.S. economy -- a strain of populism that promises to be a major political force in this year's midterm elections.
But with major financial firms and business groups already adamantly opposing key parts of the overhaul, Republican congressional leaders returned from their spring recess this week and began firing away.
In the process, hopes are fading for a bipartisan deal needed in the Senate to advance the legislation this spring. A similar bill passed the House in December without a single Republican vote.
Before a White House meeting Wednesday with bipartisan congressional leaders, Obama said he was "confident that if we work together diligently over the next several weeks" a deal could be reached.
"If there's one lesson that we've learned," Obama said, "it's that an unfettered market where people are taking huge risks and expecting taxpayers to bail them out when things go sour is simply not acceptable."
But Senate Republicans already appear to be rallying to the kind of united front of opposition that helped them slow the healthcare bill -- and are trying to seize the anti-Wall Street high ground to avoid any political fallout.
Senate Minority Leader Mitch McConnell (R-Ky.), for instance, said the legislation "not only allows endless bailouts for Wall Street, it institutionalizes them."
A centerpiece of the bill is an attempt to prevent taxpayer bailouts by giving regulators new powers to limit the risks financial firms could take, break them up if they become a threat to the financial system and seize and dismantle them if their failure would cause serious damage to the economy.
Large financial firms would have to pay into a $50-billion fund to cover the costs of such a government dismantling so taxpayers would not have to foot the bill. Those firms oppose prepaying into such a fund.
McConnell said the fund really would be used as the down payment on future bailouts of failing financial firms. As a result, he said, the bill would "leave the door open" to such bailouts, which have been soundly rejected by taxpayers.
"Americans are still dealing with the fallout from the financial crisis," he said. "Getting this policy right should be our first priority. This bill gets it very wrong."
But the White House and congressional Democrats responded aggressively with a speed and deliberation that were absent in the healthcare debate, in which Republicans took control of the issue by portraying that bill as a fearsome expansion of government power.
Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), his voice sometimes rising in anger, took to the Senate floor to dispute the assertions by McConnell and others as "poppycock."
"I don't expect the bank lobbyists and the special interests to care about the truth. But the American people deserve better from us," Dodd said. "And that's why I've been so dismayed to hear members of this body repeat the utter falsehood -- concocted by special interests whose jobs and pensions are plenty secure, thank you very much -- that this bill will lead to more bailouts."
Dodd charged that Republican portrayals of the bill have their roots in the advice of a GOP political consultant, Frank Luntz, who said in a leaked memo this winter, "The single best way to kill any legislation is to link it to the big bank bailout."
"It's obvious that the Republicans are saying 'no' again to progress for America," Senate Majority Leader Harry Reid (D-Nev.) said after the White House meeting. "We're going to move forward just as rapidly as we can with the bill."
However, to avoid a filibuster, the bill cannot clear the Senate without the support of at least one Republican. Still, administration officials said they were optimistic of a bipartisan deal as key senators continued to negotiate.
Even so, Obama told congressional leaders that he would not accept a weakened bill simply in the name of a bipartisan accomplishment, White House Press Secretary Robert Gibbs said.
Unlike the healthcare legislation, Democrats have more hope that Republicans such as Sen. Bob Corker of Tennessee will break ranks after spending months working on the complex intricacies of the legislation.
Corker said there were some loopholes in the legislation that could allow federal officials to prop up failing companies rather than shut them down.
But he and Sen. Mark R. Warner (D-Va.), who worked on that part of the legislation, said those issues could be fixed easily with an amendment.
"The rhetoric around this . . . is probably overheated," said Corker, who negotiated for weeks with Dodd to try to reach consensus on the legislation. "What we need to do is focus on this issue in an intelligent fashion."