Senators vow no taxpayer loss in Wall St. bill

WASHINGTON (AP) - The Senate was scheduled to vote Tuesday on an amendment to the sweeping regulatory overhaul that would assert that taxpayers would bear no losses from any government liquidation of a large financial firm...

TheGrio Staff

May 4, 2010

WASHINGTON (AP) — A Senate measure to protect taxpayers in future government Wall Street interventions is gaining bipartisan support as pro-regulation activists and the Obama administration girded themselves for a fight over financial controls with the banking lobby.

The Senate was scheduled to vote Tuesday on an amendment to the sweeping regulatory overhaul that would assert that taxpayers would bear no losses from any government liquidation of a large financial firm.

Taxpayers could still be called on to front billions of dollars to help cover the costs of taking down a failed firm through loans from the Treasury to the Federal Deposit Insurance Corp. But the legislation would require the Treasury to recover those costs over time from the sale of a firm’s assets and by assessing a fee to other large financial institutions.

The amendment, proposed by Sen. Barbara Boxer, a Democrat, was set to be the lead off vote in what is expected to be at least two weeks of debate on how to change the pending legislation. It has broad support in the Senate where lawmakers are eager to inoculate themselves against the publicly unpopular $700 financial bailout many supported at the height of the financial crisis in 2008.

Backed by President Barack Obama, the Democratic Senate bill attempts to undertake the broadest rewrite of the rules that govern financial institutions since the Great Depression of 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.

“We cannot allow these reforms to be watered down,” Obama told the annual meeting of the Business Council on Tuesday. “And for those of you in the financial industry whose companies may be employing lobbyists seeking to weaken this bill, I want to urge you, as I said on Wall Street a couple weeks ago, to join us rather than to fight us.”

Anticipating a fight on the floor of the Senate, the White House on Tuesday listed potential bank-backed amendments that it believes would weaken the bill.

Under the headline “The 10 Most Wanted Lobbyist Loopholes,” White House Communications Director Dan Pfeiffer cautioned against changes that would take power away from state attorneys general to enforce federal consumer regulations and efforts to create exceptions from those rules for auto dealers that make loans and department stores with financial services centers.

The White House also was wary of any changes that would create regulatory exceptions for firms that trade in derivatives and for nonbanks that would come under Fed supervision.

Senate Banking Committee Chairman Christopher Dodd, a Democrat, and the committee’s top Republican, Richard Shelby, on Tuesday were negotiating an amendment that would address Republicans complaints about how large failing firms would be liquidated under the bill. One likely outcome would be to eliminate a key provision in the bill — a $50 billion fund financed by large banks that would have been used to pay some of the liquidation costs.

Republicans argued that the mere existence of such a fund would create incentives for large firms and their creditors to behave recklessly.