President Barack Obama will push for his plan to tighten Wall Street regulations in New York on Thursday, the White House said on Monday, as he attempts to overcome solid Republican opposition.
The battle over a financial regulatory overhaul represented a new election-year fault line in Washington after the bruising healthcare debate, and poses a new challenge for Obama as he seeks to gain passage of one of his key domestic priorities.
Democrats have seized on a fraud suit against Goldman Sachs as an example of why Wall Street needs to be cleaned up after a financial crisis that triggered the worst U.S. recession since the Great Depression.
Senate Banking Committee Chairman Christopher Dodd said his version of financial regulation would have stopped the kind of activity alleged in the fraud charges against Goldman Sachs.
U.S. Representative Barney Frank said securities regulators’ fraud case against Goldman Sachs increases the chance that the financial package will pass.
Frank, chairman of the House Financial Services Committee, also said he does not believe all 41 Republicans in the Senate will vote against the financial reform bill.
“It reinforces the need for much of what we were doing” on financial reform, Frank told CNBC Television. On Friday, the U.S. Securities and Exchange Commission charged Goldman with fraud for its marketing of a subprime mortgage product.
“The SEC’s charges against Goldman Sachs increase the chance that regulation is going to pass, though I thought it was already fairly likely,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
White House spokesman Robert Gibbs said Obama will on Thursday call for swift action by the U.S. Senate and “remind Americans what is at stake” if a strong Wall Street reform package does not go ahead.
The KBW Bank Index rose 0.4 percent on Monday as investors set aside longer-term regulatory fears stemming from Goldman’s charges to focus on strong earnings from Citigroup.
“I don’t think investors are too concerned about financial regulation,” said Kaufman. “Many banks are up today, including Citigroup and Bank of America, which suggests that investors are more focused on earnings.”
The Senate is expected to vote within weeks on the reform bill, which Obama says will hold Wall Street accountable for its banking practices and put rules in place to prevent more taxpayer-funded bailouts of companies in trouble.
Republicans say the Democratic-backed bill will lead to more such bailouts and say it establishes new regulatory powers that would stifle small businesses and community banks.
All 41 Republicans in the 100-seat Senate expressed their opposition to the bill, which passed the Senate Banking Committee without their support, in a letter on Friday but said they were willing to work with Democrats on the issue.
Senator Judd Gregg, a Republican member of the Senate Banking Committee, said in an interview on CNBC that Congress risked overreacting on the financial regulatory overhaul.
Senate Republican leader Mitch McConnell said he had various concerns about the legislation but believed they could be addressed because of the “clear bipartisan support for improving this bill.”
“It’s my hope that we can work together to close the remaining bailout loopholes that would put American taxpayers on the hook for financial institutions that become ‘too big to fail,’” he said.