President Barack Obama accused Republicans on Saturday of spreading misinformation about a Democratic bill that aims to tighten oversight of Wall Street banks and their practices.
With debate heating up in Washington about reforming the financial rules, regulators charged Wall Street giant Goldman Sachs with fraud on Friday.
Bank shares and the broader stock market fell on fears the civil lawsuit could make it more difficult for the financial industry to ward off reform.
After successfully shepherding his healthcare overhaul through Congress, Obama is pushing for victory on the financial regulatory reforms — a popular issue with voters in the run-up to congressional elections in November after a financial meltdown sparked the worst U.S. recession in decades.
The Senate is expected to vote within weeks on the reform bill, which Obama said would "hold Wall Street accountable" and put rules in place to prevent any more taxpayer-funded bailouts of companies in trouble.
"Never again will taxpayers be on the hook because a financial company is deemed 'too big to fail'," Obama said in his weekly radio and Internet address.
Under the controversial Troubled Asset Relief Program launched by the Bush administration, $700 billion was set aside to help major financial firms and automakers, including AIG, Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley and Goldman Sachs.
Republicans insist the Democratic bill will lead to more taxpayer-funded bailouts and say it establishes new regulatory powers that will stifle small businesses and community banks.
All 41 Republicans in the 100-seat Senate expressed their opposition to the bill in a letter on Friday but said they were willing to work with Democrats on the issue.
Obama said he still hoped to win Republican support for the bill but lashed out at Republican Senate leader Mitch McConnell, accusing him of making a "cynical and deceptive assertion that reform would somehow enable future bailouts — when he knows that it would do just the opposite."
$50 billion fund
The bill proposes setting up a $50 billion fund to pay for liquidating distressed financial firms, a measure not favored by the White House. Republicans have said the fund presents the possibility of continued bailouts.
Senate Democrats were reported to be considering dropping the controversial proposal after the main sponsor of the bill, Senate Banking Committee Chairman Christopher Dodd disowned the fund, saying it was proposed by Republicans and community banks.
Republicans hit back at Obama's criticism of McConnell.
"It's especially disappointing for the president to attack Senator McConnell for raising concerns about the bailout loopholes in the bill when just last night the White House agreed with Senator McConnell and its own treasury secretary and asked Senate Democrats to remove the $50 billion fund," McConnell's spokesman, Don Stewart, said on Saturday.
"Senator McConnell takes the president at his word that he wants a bill that does not expose taxpayers to future bailouts and will not destroy job creation. And we are committed to working with anyone willing to achieve that."
With control of the Senate and House of Representatives at stake in the November election, Democrats and Republicans are keen to tap into the anger felt by many Americans against Wall Street firms in the wake of the financial crisis. Reining in Wall Street would be a popular move with voters.
"What is clear is that this crisis could have been avoided if Wall Street firms were more accountable, if financial dealings were more transparent, and if consumers and shareholders were given more information and authority to make decisions," Obama said in his weekly address.
He said the reforms would achieve the goals of transparency and protection, while closing loopholes that had allowed some firms to take huge risks that threatened the whole economy.
The Obama administration has taken a more aggressive stance on Wall Street since the Democrats lost a Senate seat in Massachusetts in January. The election highlighted voter resentment against big banks and big bonuses.