Image: Traders in New York
Mark Lennihan  /  AP
Traders work at the New York Stock Exchange during President Obama's speech Thursday.
By
updated 4/22/2010 9:06:31 PM ET 2010-04-23T01:06:31

Declaring themselves short of patience, Democrats set an initial showdown vote for next Monday on legislation to clamp new regulations on the financial industry while Republicans insisted on more bargaining. President Barack Obama admonished Wall Street leaders "to join us instead of fighting us" to prevent a future national financial collapse.

The test vote loomed in an election-year climate, with lawmakers ready to campaign this summer on the results of this legislation — written in reaction to the economic crisis that threw the nation into recession — as well as the hard-fought health care overhaul.

"The time for stalling is over," declared Senate Democratic leader Harry Reid of Nevada. That drew a quick response from the Republican leader, Mitch McConnell of Kentucky: "I don't think bipartisanship is a waste of time."

Without an accord with the GOP, which was blocking the start of formal debate on the bill, Democrats would need 60 votes to move ahead in the Senate. Despite some signs of wavering, all 41 Republicans in the 100-member Senate remained publicly opposed on Thursday.

Reid was eager to test the Republican resolve, even as bipartisan negotiations continued. Reid conceded that the timetable for a vote could change if the talks bear fruit. Without a bipartisan bargain, Democrats were determined to portray Republicans as Wall Street allies and put them through test votes until enough senators agreed to proceed.

GOP roadblock
Emerging from a late afternoon meeting with Banking Committee Chairman Christopher Dodd, the committee's top Republican, Richard Shelby, said chances of an agreement before Monday's vote were "probably not probable." He predicted Republicans would vote as a bloc to put off action on the bill.

At the same time, senior Democrats signaled Thursday they hope to ease day-old restrictions a Senate committee slapped on the trading of financial derivatives, the complex investments blamed as a contributing factor to the economic near-meltdown of 2008.

The sweeping regulations represent the broadest attempt to overhaul the U.S. financial system since the 1930s. A House-passed bill and the pending Senate version would create a mechanism for liquidating large firms, set up a council to detect systemwide financial threats and establish a consumer protection agency to police lending, credit cards and other bank-customer transactions.

Barack Obama
Alex Brandon  /  AP
President Barack Obama speaks about financial reform at the Great Hall at Cooper Union in New York Thursday.
Opinion polls show the public is receptive to new federal curbs on Wall Street after twin catastrophes — the recession that has driven unemployment to double-digits and a banking crisis that has led to huge losses in Americans' retirement accounts.

No details were immediately available on possible changes on derivatives. But the Obama administration and some Senate Democrats have raised concerns over provisions cleared by the Senate Agriculture Committee, including one that would effectively require banks to spin off their derivatives business.

Competing proposals
Reid said the heads of two Senate committees had met to discuss combining competing proposals on derivatives, financial products such as corn futures or stock options whose worth depends on the values of underlying investments. Companies use them to hedge against risks, such as interest rate swings or oil price spikes. But they became a vehicle for speculation and helped trigger the financial crisis when the underlying investments — mortgage-backed securities, for example — plunged in value.

Reid's comments were the first official word that the measure approved on Wednesday by the Agriculture Committee would not go directly to the Senate floor — even though the committee's chair, Sen. Blanche Lincoln of Arkansas, had told reporters she had assurances it would.

Video: Finance reform, from Wall St. to Main Street Lincoln, who faces a difficult re-election race, reacted with barely disguised anger. The committee "has passed not only the strongest, but the only bipartisan Wall Street reform bill," she said in a statement released to The Associated Press. "This legislation will only strengthen the broader reform bill and it should be incorporated as is and sent straight to the Senate floor."

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Obama has made the broader legislation one of his congressional priorities, and in a speech in New York he chastised Wall Street for risky practices at the same time he sought its help for "updated, commonsense" banking regulations to head off any new financial crisis.

At a news conference during the day, top Democrats accused Republicans of falsely claiming a bill approved earlier in the Senate Banking Committee included a $50 billion fund that would be used to bail out failing banks.

"The lies are not taking hold," said Sen. Chuck Schumer, D-N.Y.

Earlier, McConnell challenged Democrats to disprove his claim. "This bill would give the administration the authority to use taxpayer funds to support financial institutions at a time of crisis," he said.

"Yes, that bill says taxpayers get the money back later, but that sounds awfully familiar," he added.

As for derivatives, the Agriculture Committee legislation would require bank companies to spin off those operations, barring them not only from trading in the instruments themselves but also from creating deals for other clients. The objective is to avoid exposing commercial bank operations to the risks of the more speculative business.

The Banking Committee version would prohibit bank companies from engaging in speculative trades with their own accounts, but it would not do away with the ability of banks to create derivatives markets for clients.

Last week, a senior Treasury official indicated a preference for the approach taken by the Banking Committee, and there is additional concern that the alternative could lead to greater concentration in a market where a handful of firms conduct about 80 percent of derivatives business.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Obama urges 'end to taxpayer bailouts'

  1. Closed captioning of: Obama urges 'end to taxpayer bailouts'

    >> louisiana tonight. thanks.

    >>> here in new york today, president obama was pitching financial reform in the shadow of wall street itself. instead of slamming the big banks , the speech was more of a call to arms , urging everybody to get on board. our white house correspondent savannah guthrie with us from there with more. savannah, good evening.

    >> reporter: good evening, brian. with his wall street reform package at a crucial stage, a vote expected that is key on monday, the president went to the heart of the financial system in this country, new york city to close the sale.

    >> it's also good to be back in lower manhattan . a few blocks from wall street . it really is good to be back.

    >> reporter: in new york , the president framed his plans for reform as wall street 's patriotic duty.

    >> i urge you to join me, not only because it is in the interest of your industry, but also because it's in the interest of your country.

    >> reporter: the mostly-friendly audience of supporters also included the ceo of goldman sachs , whose firm was just charged by the s.e.c. with a billion dollar fraud and executives of other wall street titans like bank of america and jp morgan chase .

    >> a free market was never meant to be a free license to take whatever you can get, however you can get it. that's what happened too often in the years leading up to this crisis.

    >> reporter: from the floor of the new york stock exchange , traders were watching, some expecting worse.

    >> at first i thought maybe he was going to bash wall street . it wasn't that. he was really very nice to wall street , actually.

    >> reporter: on capitol hill , democrats pushed forward setting a key procedural vote for monday even as negotiations with republicans were still under way.

    >> reserving the right to object and i will object. here we go again.

    >> we are going to move forward on this piece of legislation because the american people demand it.

    >> reporter: the reform plan includes a new consumer protection agency, procedures to dissolve large firms that get into trouble, and restrictions to keep big firms from taking risks that threaten the whole financial system . the bill does not set hard limits on the size of banks which are only getting bigger. 15 years ago, the six largest banks represented 17% of the american economy . now 63%. some democrats want the bill to change that.

    >> on the front end , we have to make sure the banks themselves don't get too big because too big to fail is too big.

    >> reporter: today the president called on wall street to stop fighting reform.

    >> because ultimately, there is no dividing line between main street and wall street . we will rise or we will fall together as one nation.

    >> reporter: ultimately, democrats do feel confident they are going to get this financial regulatory reform bill through the congress. meantime, seven former and current executives from goldman sachs , including the ceo, lloyd blankfein have been called to capitol hill to testify on tuesday.

    >> savannah guthrie at the white house for us tonight. thanks.

    >>> the president's message to wall

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