Senators drew closer to bridging their differences over U.S. financial-overhaul legislation in negotiations fueled by the government’s lawsuit against Goldman Sachs Group Inc. and Republicans’ threat to oppose the Democrats’ measure.
Richard Shelby, the top Republican on the Senate Banking Committee, said his talks with the panel’s chairman, Democrat Christopher Dodd, are making progress.
“I’m optimistic we’re going to get a bill, and it’s going be a good bill,” Shelby, of Alabama, told a Washington news conference yesterday. “We’re not there yet, but I think we’re closer than we’ve ever been.”
The Securities and Exchange Commission’s announcement last week that it was suing Goldman Sachs for fraud added to Democratic momentum, making it tougher for Republicans to fight a bill aimed at strengthening consumer and investor protections in the wake of the financial crisis.
“The dissatisfaction with Wall Street and then the Goldman news has just changed the political dynamic,” said Brian Gardner, senior vice president for Washington research at Keefe Bruyette & Woods Inc. “There really is a new kind of political model at work here,” said Gardner, a former staffer on the House Financial Services Committee.
President Barack Obama will make his case for the measure in a speech today at New York’s Cooper Union. He’ll say the new rules are needed so the U.S. economy isn’t at the mercy of “risky decisions” on Wall Street, White House press secretary Robert Gibbs said.
Obama dismissed House Republicans’ questions about the timing of the SEC’s lawsuit against Goldman. He said in a CNBC interview yesterday that the White House had no influence on the SEC’s decision, and any notion that the administration knew ahead of time about the lawsuit is “completely false.”
Lawmakers led by Representative Darrell Issa of California wrote SEC Chairman Mary Schapiro April 20 expressing concern that “politics have unduly influenced the decision and the timing” of the enforcement action.
Republicans and Democrats are trying to tap into voter anger at Wall Street banks and the $700 billion bailout of Citigroup Inc. and Bank of America Corp. before the November midterm congressional elections. Democrats accused Republicans of siding with the banks to keep the status quo. Republicans called Dodd’s measure a permanent taxpayer-funded bailout, and all 41 of them signed a letter last week pledging to oppose the bill as it stands now.
The bill would strengthen rules for derivatives oversight, create a consumer protection bureau at the Federal Reserve and set up a mechanism to unwind failed large financial firms in an effort to avoid having taxpayers pay to prop up those companies.
Republicans and Democrats softened their tone this week, agreeing that the legislation should prevent future bailouts.
Senator Kay Bailey Hutchison, a Texas Republican, said she has met with White House economic adviser Lawrence Summers and Treasury Secretary Timothy Geithner, who has been courting Republican votes.
“We are pretty close,” Hutchison told reporters. “We have the same goal. We want ‘too big to fail’ to go away.”
In another sign of bipartisanship, Senator Charles Grassley, an Iowa Republican, joined Democrats in the Senate Agriculture Committee in approving derivatives legislation that would require U.S. lenders such as JPMorgan Chase & Co. to spin off their swaps trading desks.
Senator Blanche Lincoln, an Arkansas Democrat who offered the derivatives bill, said her proposal would be merged with the broader overhaul bill.
Republicans, including Shelby, said their April 16 letter shifted the tone of the debate on the Dodd bill after previous compromise talks collapsed in November and February.
“That sent a signal that we, all of us in the Republican caucus, were opposed to the Dodd bill as it came out of the committee,” Shelby said.
Democrats, who control 59 seats, need the support of at least one Republican to overcome procedural hurdles and bring the measure to a Senate floor vote. Unity will give his party leverage during the negotiations, Republican Senator John Cornyn of Texas told reporters yesterday after Republicans met on the bill.
“That may be the only leverage we have,” Cornyn said.
Democratic Leader Harry Reid “is prepared to move forward and have a motion to proceed brought up on the floor of the Senate and hope that some senators on the other side will come our way,” said Dick Durbin of Illinois, the No. 2 Senate Democrat.
The motion to proceed to the bill and another to shut off debate on that question will be filed by week’s end to set up procedural votes early next week, Durbin said.
“We can still negotiate after the motion to proceed passes,” Durbin said.
Dodd raised the possibility the Senate will begin considering the bill as early as today, saying he wouldn’t wait for a deal with Shelby to go forward. Negotiators will spend a couple of days crafting an amendment to the legislation “that will be reflective of what the Ag Committee did and accommodate other legitimate interests that need to be dealt with,” he said.