Momentum building for financial reform-White House

Posted on Reuters.com.  Click here to view original article.

Thu Apr 8, 2010 12:18am BST
Reporting by Matt Spetalnick and Alister Bull; Editing by Eric Walsh


* Financial regulation to top Obama's domestic agenda

* Risks seen for Republicans seen siding with Wall St

* Senate Democrats seen starting debate this month (Adds more comments)

WASHINGTON, April 7 (Reuters) - Political momentum to toughen U.S. bank rules is building, the White House said on Wednesday, as President Barack Obama shifts his focus to financial regulation after victory on healthcare reform.

"I think everyone gets the urgency of this, two years on. I think they get it on the Hill. I think they get it in the business community," Neal Wolin, deputy secretary of the U.S. Treasury, told a White House briefing with other officials.

Obama is expected to push regulatory restructuring as his top domestic policy priority when Congress returns on Monday from its Easter vacation.

The administration officials did not lay out a specific timeline for sending legislation to the president's desk for signing. But Obama wants tougher rules agreed by September, two years after the failure of investment bank Lehman Brothers almost destroyed the U.S. financial system.

The proposals aim to stamp out the practices that led to the collapse, but they face opposition from opposition Republicans concerned about excessive regulation.

Democrats hope to make it politically dangerous for the Republicans preparing for midterm congressional elections in November to be seen siding with Wall Street, which is widely blamed by ordinary Americans for the crisis.

"This is essential. We cannot take the risk of putting the economy, putting families, putting small businesses, large businesses at that kind of risk again," said Diana Farrell, deputy director of Obama's National Economic Council.

The House of Representatives approved a sweeping financial reform bill in December. The Senate is on track to begin formal debate this month on legislation that was passed by the Senate Banking Committee without Republican support. Democrats currently control both congressional chambers.

"We think this is picking up momentum ... there is a clear understanding of the importance of enacting legislation sooner (rather) than later," Wolin said.

Proposed legislation drafted by Senate Banking Committee Chairman Christopher Dodd would toughen oversight of big banks, create a $50 billion fund to help pay for the costs of winding down big firms that become insolvent and set up an agency to protect consumers from the kind of risky financial products that triggered the 2008 crisis.

Wolin said Obama was happy with the Dodd bill's provisions on consumer protection and establishing tools to wind down firms otherwise deemed to be "too big to fail."

The administration would oppose any effort by Republicans to water down these proposals and urged them swift passage.

"The sooner we do this the better, because the amount of uncertainty in the economy right now, the amount of uncertainty in the financial system, is unhealthy," Farrell said.