Democrats Defend Bill to Rein in Wall Street

Democrats Defend Bill to Rein in Wall Street
By CARL HULSE
Copyright by The Associated Press
Published: December 10, 2009
http://www.nytimes.com/2009/12/11/business/11regulate.html?th&emc=th


WASHINGTON — House Democrats defended their Wall Street regulatory overhaul on Thursday against sharp Republican criticism that it would perpetuate a bailout mentality, and they accused Republicans of aligning themselves with the financial institutions that caused the financial crisis.

As the House worked through dozens of proposals to change the measure, Democrats said the sweeping legislation would better protect consumers in their dealings with banks, credit card companies and others selling financial products while holding executives rather than taxpayers accountable for bad business decisions.

“The legislation says very clearly to Wall Street: the party is over,” said Nancy Pelosi, the House speaker.

Republicans, trying to emphasize an issue that strikes a chord with conservatives, said the creation of a new $150 billion fund to dissolve failing businesses would mean a continuation of the bailouts that have sparked public anger.

“My constituents in Kansas and folks across the country have bailout fatigue,” said Representative Lynn Jenkins, Republican of Kansas.

Democrats said Republicans were misrepresenting the measure, adding that the fund would be established through assessments on major players in the field of high finance.

“There are no taxpayer dollars that will be used,” said Representative Barney Frank, Democrat of Massachusetts and chairman of the Financial Services Committee, adding that the money would not be used to keep companies operating but only for the “burial costs” of dismantling them.

Both sides said they believed that the final vote on the measure, expected for Friday, had implications for next year’s elections.

Democrats warned that House Republicans, who appear to be virtually united against the measure, would be casting a risky vote if they aligned themselves against legislation seeking to protect the public from abusive financial practices and prevent another Wall Street collapse.

“Once again we find them siding with the special interests against the taxpayer, against the consumer,” said Representative Chris Van Hollen of Maryland, chairman of the Democratic Congressional Campaign Committee. “They are going to pay a very heavy price.”

Republicans said they believed they could make the case that the measure would tighten credit, cost jobs and give the government too much power over private enterprise.

“I think those people who are concerned about consumers realize something needs to be done,” said Representative Scott Garrett, a New Jersey Republican who sits on the Financial Services Committee. “But substantiating and continuing a situation where you have bailouts, continuing a situation where you hurt jobs and expand the authority of government entities that didn’t do their jobs in the first place is not the way to do it.”

The legislation, which combines nine separate proposals, is viewed by Democrats as a comprehensive response to the financial crisis last year. It seeks to place new controls and transparency on derivatives, the complex financial transactions that were blamed as a main cause of the economic collapse. It would allow consumers to sue credit rating agencies for flawed evaluations of financial products.

The measure also would give shareholders an advisory vote on executive compensation and allow regulators to intervene in cases of inappropriate pay packages. It would put extensive new scrutiny on companies deemed to be large enough or interconnected enough to put the entire economy at risk in an effort to reduce the chances that, in a future crisis, they would be judged “too big to fail.” It bolsters the ranks of federal regulatory agencies.

After taking steps to ease opposition from liberal and centrist Democrats, House leaders were optimistic they could win approval of the measure. But efforts to reshape the legislation were still being made, both by lawmakers who said it did not go far enough in reining in financial excesses and by those who said they wanted to ease its potential to stifle economic growth.

A major showdown loomed over a Democratic proposal to try to strip from the bill a new Consumer Financial Protection Agency with broad power to regulate a variety of financial products like mortgages and credit cards.

Representative Walt Minnick, Democrat of Idaho, wants to replace the agency with a council of regulators to coordinate existing consumer protection activities. Critics of the new agency said it could lead to costly new regulations and requirements.

Authors of the measure say they think they can defeat the effort, and consumer groups have rallied to support the new agency.

“Consumers have paid a very steep price for years of weak federal oversight of unscrupulous banking and lending practices,” said Jim Guest, the president of Consumers Union. “It’s time for Congress to put an end to do-nothing financial industry oversight and make sure that consumers have a real watchdog looking out for their interests.”

The financial regulatory bill is a top priority of the Obama administration, and the White House has been actively involved in working out disputes that have slowed the progress of the measure. The Senate, which is not as far along as the House, is not expected to take up a similar proposal until next year.