By Shailagh Murray and Brady Dennis
Washington Post Staff Writer
Tuesday, April 20, 2010; A01
Democratic leaders scrambled Monday to peel away the Republican votes they need to bring a Wall Street reform package to the Senate floor this week -- an effort hampered by sharp partisan divisions.
Both sides are eager to exploit a lingering resentment toward Wall Street in the election-year debate. Democrats have seized on the attempt to curb reckless investment practices as part of an effort to depict the GOP as out of touch with the concerns of average Americans. On Monday, Democrats sought to use a lawsuit brought against financial giant Goldman Sachs by the Securities and Exchange Commission as a cudgel to persuade Republicans to line up behind the bill.
Republicans, in turn, think voters have even less faith in Washington than in the banks and investment houses that played central roles in the nation's economic collapse, and they are portraying Democrats' overhaul attempt as a "bailout" that could cost taxpayers billions.
White House officials said President Obama will give a speech at New York's historic Cooper Union college on Thursday in which he is expected to remind voters in the starkest terms of what many in Washington assert is the irresponsibility that took hold on Wall Street as financial firms sought fatter profits.
A laundry list of presidents have appeared at Cooper Union to deliver policy pronouncements, and Obama is no stranger to the venue. At a critical point in his bid for the Democratic presidential nomination, he used the backdrop to outline his economic message and the need to establish a "21st-century regulatory framework" for a Wall Street that had proved surprisingly supportive of his candidacy. Executives at Goldman Sachs gave almost $1 million to Obama's 2008 campaign. But the government action brought against that firm has now become a pivotal point in the administration's push for reform.
"By not enacting our legislation -- by filibustering it, stopping it -- we leave the American public vulnerable once again to the kind of shenanigans that have occurred in our large financial institutions across this country," the Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), told reporters Monday. "This comes right down to this basic question," he said. ". . . Whose side are you on? What more do you need to know?"
Dodd's 1,400-page bill would create an independent regulator, housed at the Federal Reserve, that would be charged with protecting consumers of mortgages, credit cards and other loans against lending abuse and other deceptive practices. The measure would also create oversight of the vast derivatives market, curtail the regulatory powers of the Federal Reserve and give the government authority to wind down large financial institutions in an orderly way.
Republicans have argued that the measure contains loopholes that could lead to government bailouts of such firms. They also have maintained strong opposition to the creation of the new consumer regulator, arguing that it would be another layer of government bureaucracy that would burden businesses, stifle innovation and lead to higher costs.
But even as the rhetoric grew more heated, Democratic and Republican negotiators explored potential areas of compromise, including changes to a $50 billion fund that the financial industry would set up to liquidate bankrupt firms. Some Republicans say the firm could encourage the high-risk investments that led to the current crisis.
Dodd, the chief sponsor of the Senate legislation, said the fund could be altered in the interest of a bipartisan deal. "There are other ways of doing it," he said. "This isn't the only way."
Treasury Secretary Timothy F. Geithner made the Capitol Hill rounds on Monday, visiting two Republican senators as part of the administration's quest for converts. Unless Democrats can pick up at least one Republican on a procedural vote to bring the bill to the Senate floor, a GOP filibuster could stall it indefinitely.
Senate Minority Leader Mitch McConnell (Ky.), the main GOP critic of the overhaul measure, struck a more conciliatory tone in a Senate floor speech Monday. Obama had singled out McConnell in his radio address Saturday for what he called the GOP leader's "cynical and deceptive assertion" that the Democratic bill would lead to more bailouts.
In his remarks on Monday, McConnell conceded that "both parties agree on this point: No bailouts." He urged his Democratic colleagues to "come together and direct our energies toward making sure we achieve that goal, and leave aside all the name-calling and second-guessing."
Jim Manley, spokesman for Senate Majority Leader Harry M. Reid (D-Nev.), said the bill could reach the floor as soon as Thursday, although a vote to allow debate to begin probably would occur no earlier than Monday. Senate Agriculture Committee Chairman Blanche Lincoln (D-Ark.) is expected to complete work Wednesday on a final portion of the legislation that would regulate derivatives.
Senators on both sides have held out hope that a large bipartisan majority could materialize, by the time the amendment process is complete and the bill comes to a final vote. But in the short term, to overcome GOP procedural objections to bring the measure to the Senate floor, Democrats are targeting three Republicans: Sens. Olympia J. Snowe and Susan Collins of Maine and Bob Corker of Tennessee. The three have said they oppose the legislation in its current form, but Snowe and Corker said Monday that their concerns could be resolved in a matter of days.
The House passed an overhaul that would create the agency without GOP votes in December.
As the measure advances, financial lobbyists are pressing for various changes. Even as Obama prepared to deliver his speech on Thursday, White House Chief of Staff Rahm Emanuel met privately Sunday night with some of the city's top investors, warning them that the administration supports tough new rules.
Although Republicans have depicted the Dodd bill as one-sided, it reflects months of bipartisan talks between members of the Senate banking committee. And even as their leaders traded barbs, rank-and-file Republicans have insisted that, unlike with health-care legislation, they are determined to pass a bill.
"I don't think either side of the aisle deserves a badge of honor as it relates to the way this has been discussed," Corker said on the Senate floor Monday. "This is something way beyond using poll-tested language and should, in fact, be dealt with in a serious way."
Staff writers Michael D. Shear and Jason Horowitz contributed to this report.