Obama Defends Financial Overhaul
Fault Lines Emerge as Industry Groups Blast Plan to Create Consumer Agency
Thursday, June 18, 2009
President Obama introduced his plan to reform financial regulations yesterday as a key to reviving the economy, setting up an intense battle over the particulars that is likely to rage on Capitol Hill for the rest of the year.
Legislators, regulators and advocates all welcomed the idea of change, but industry groups already are arguing that elements of the plan will hurt consumers or the broader economy, not to mention financial firms.
Opposition is piling up with particular speed against the idea of a new agency with broad powers to protect borrowers and other customers of financial firms, setting up a high-stakes contest between the industry and the White House for the loyalty of a few moderate senators who increasingly hold the balance of power.
The president used his bully pulpit yesterday to argue that the government must intervene against a "culture of irresponsibility" that encompasses banks and borrowers, becoming more involved in the markets to create a basis for sustainable growth. In addition to a consumer protection agency, he proposed new powers for the Federal Reserve to regulate large firms and critical markets, and urged a series of smaller federal interventions.
"Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and the failure of their government to provide adequate oversight," Obama said. "Our entire economy has been undermined by that failure."
The administration's plan, presented in an 85-page "white paper" with a green cover, is the product of months of debate with a wide range of legislators, experts and interest groups. Senior officials tried to assess the causes of the crisis, consider the best policy responses and then push those ideas through the filter of political viability. The result is a sweeping plan that combines a few overarching proposals with dozens of small tweaks to the system.
Implementing the entire plan would require scores of separate actions, including new laws, rewritten rules and international coordination.
The two congressmen most responsible for the next stage in the process walked side-by-side from the White House yesterday afternoon, carrying the debate to the other end of Pennsylvania Avenue and vowing to return with a final bill by the end of the year.
Rep. Barney Frank (D-Mass.) and Sen. Christopher J. Dodd (D-Conn.), whose committees will hammer out most of the details, were invited by the White House to sit alongside the president's senior advisers during the speech. Afterward they expressed broad agreement with the principles but said that many of the specific proposals needed to discussed and modified, and that some were unlikely to survive.
Still, Frank said as Dodd nodded, "This will be on the president's desk before we adjourn for the year."
The president's speech came on the same day that several large financial firms repaid federal aid, underscoring the administration's transition from fighting a financial crisis to addressing its causes. Nine banks said yesterday that they had repaid a total of $66 billion, including J.P. Morgan Chase, which wired the government $25 billion, and Capital One Financial of McLean, which repaid $3.6 billion.
Regulators had approved the repayments last week after concluding that the strongest large banks no longer needed the aid.