Some congressional Democrats were slow to back President Obama's proposed reforms of the financial regulatory system, expressing numerous concerns, but lauding the "first steps" taken by the administration.
In interviews Wednesday morning, some House and Senate Democrats voiced various criticisms of the plan, indicating the plans put forth by the administration may have to clear hurdles in both parties once in Congress.
"I do have some concerns about the administration's proposals," Sen. Mark Warner (D-Va.), a former venture capitalist, told Bloomberg News. "I'm fairly concerned about their idea of putting systemic risk oversight further within the Federal Reserve."
"But the plan that the president is going to announce...I think is a good, common sense start in the right direction," Rep. Jim Himes (D-Conn.) told Fox Business Network. Himes's district, located in the southern Connecticut suburbs of New York City, is home to a variety of financial service firms and professionals.
"We need to be very careful that we don't cast too wide a net," Himes said.
Another Democratic lawmaker said the administration's proposals do not go far enough.
"Well the two biggest problems I have is that it doesn't focus on the credit rating agencies sufficiently, and it doesn't deal with over-the-counter, custom derivatives," said Rep. Brad Sherman (D-Calif.), a member of the Financial Services Committee.
"We have a system where the issuer of a debt security selects the credit rating agency," Sherman added. "That's like having the home team select the umpire -- you're not going to get a fair game."
Congressional Republicans have fretted that the new regulations fail to address gaps in existing regulation, and have criticized the administration for adding new rules to businesses in the financial sector.
The new regulations on the financial industry will slow down growth and put the government's "foot" on the back of business, House Minority Leader John Boehner (R-Ohio) asserted Wednesday.
"I just think that the government involvement in the financial industry is going to be too big of a foot on an industry that's already having problems," Boehner said in an appearance on ABC this morning.
The Republican leader claimed the new regulation would give the government too big of a role in determining things like credit card interest rates and the availability of some financial services.
"When it comes to the development of new financial products to serve the American people, almost all of these would have to have an approval by some government agency before they're offered," Boehner said.
The remarks strike an early tone from Republicans in reaction to the roll-out of new financial regulations from the Obama administration.
Boehner said the GOP agrees that there are gaps in current regulation that should be filled in, but asked: "The question is how big of a foot does the government have to play into the private markets in our country?"
President Obama tweaked Wall Street Tuesday for a nearsighted memory about how close the economy came to collapsing.
"You know, I think that Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected," Obama said in an interview with Bloomberg News.
The president sat down for interview with Bloomberg and CNBC to preview his financial regulation reforms he'll roll out Wednesday.
"When I hear some of the commentary that's been creeping up about, 'You know, it's time for government to get out of the economy. And what's the Obama administration doing?'" Obama responded to critics in the business community on Bloomberg.
"I have to try to remind them -- all we're doing is cleaning up after the mess that was made," the president said.
Obama reiterated his hope that his administration would extricate itself from involvement in a number of companies once the economy has stabilized, but emphasized the need for new regulation as the economy moves forward into recovery.
The Obama administration's intervention in the economy mimics South American regimes of the 1980s that nationalized industries, a Republican congressman argued Tuesday.
Rep. John Campbell (R-Calif.) asserted that President Obama's policies have created an environment of "political uncertainty" in the U.S. for businesses and investors during a conference with conservative bloggers broadcast from the Heritage Foundation.
"There's a political risk to doing business in the United States," Campbell said, before comparing the business environment to those in South American countries in the '80s.
A number of Latin and South American nations suffered under military juntas -- which alternated between leftist and ultraconservative regimes -- during the 1970s and 1980s.
"What there is right now is a political risk, because our government...is selectively changing the rules of the game," Campbell told the bloggers. "People are wondering, 'Are the rules going to change on me?'"
Campbell, a former auto dealer, spoke specifically about the administration's intervention in General Motors and Chrysler, which he said reorganized countries to the detriment of secured investors.
Campell lamented an "abrogation of contracts" in the government's prepackaged bankruptcy deals with the automakers, which he deemed "even scarier than the mismanagement" in the companies.
"At some point the constitutionality of this whole thing needs to come into question," he said. "This is part of the reason why the Obama administration is running into so many problems in their public-private partnerships."
President Obama's forthcoming overhaul of financial regulations should avoiding creating new regulations for corporations and instead focus on reform of the existing system, the Chamber of Commerce argued Tuesday.
In a conference call preceding the administration's expected announcement of a new framework for the financial services industry, the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness (CCMC) President David Hirschmann argued strongly against a new consumer protection regulator that will reportedly be introduced tomorrow.
"We need stronger consumer protections," Hirschmann said. "Creating a new consumer protection authority is not going to be a silver bullet; in fact, it may be a lead balloon."
The Chamber said it preferred the administration focus on increasing regulators' effectiveness and coordination, as well as on fixing gaps in existing regulation.
"We support an overhaul and transformation of existing regulators," Hirschmann argued. "Simply put, today's regulators don't have the tools or insight of the businesses they're regulating."
Examples of an overhaul the Chamber could support, Hirschmann said, would include required registration for hedge funds, increased transparency in derivatives markets, and an exit strategy for government intervention in companies.
The consumer protection regulator, however, seemed to be the Chamber's biggest concern in the forthcoming regulation.
"We will not support a standalone consumer protection regulator that cannibalizes the current system," Hirschmann said. "I think we'll have to demonstrate there's a more effective way to do consumer protection."
An Illinois lawmaker has introduced legislation that would assess insurance premiums on banks and other financial institutions that engage in risky behavior.
Rep. Luis Gutierrez (D-Ill.), the chairman of the Subcommittee on Financial Institutions and Consumer Credit, announced Tuesday that he'd introduce the "Bank Accountability and Risk Assessment Act of 2009," which he said would reduce stress on the Federal Deposit Insurance Corporation (FDIC) from banks deemed "too big to fail."
The law would assess insurance premiums on banks whose investments are deemed a risk to the FDIC's insurance fund, and would charge a systemic risk premium to institutions seen as risking the entire financial services sector. Those assessments would be based on institutions' total liabilities.
"The current assessment process for banks fails to account for systemic risks that the largest institutions present to the [Deposit Insurance Fund] and the taxpayers," Gutierrez said in a statement.
He also said the bill would help smaller banks with more conservative investments.
"The current assessment system disproportionately advantages the largest institutions at the expense of small banks," Guteirrez said. "While small banks pay insurance premiums on nearly their entire balance sheets, large banks pay on only half."
The labor consortium American Rights at Work (ARAW) called business groups opposed to the Employee Free Choice Act (EFCA) "two-faced" on the legislation's arbitration provision.
In an ad running in today's Capitol Hill newspapers, including The Hill, ARAW asserts that business are willing to engage arbitration when it suits their interests, but not when it benefits labor groups.
"Labor law reform must ensure that workers who want to join a union are able to do so without facing endless delays from corporations seeking to deny them a voice in the workplace," ARAW spokesman Josh Goldstein said. "Big Business' position is hypocritical and motivated by their desire to maintain a status quo in which corporations make millions while middle class families struggle to get ahead."
In particular, the ad takes aim at the U.S. Chamber of Commerce, a principal opponent of EFCA. View the ad below:
Rep. Paul Kanjorski (D-Pa.), a leading Democrat on the House Financial Services Committee, is calling for an immediate update on the government's investigation into the $65 billion fraud committed by Bernard Madoff.
Kanjorski said on Monday that the inspector general of the Securities and Exchange Commission, David Kotz, has provided only a one-page summary of the investigation in the more than five months since Kotz testified before the House committee. The inspector general's office began looking into the fraud six months ago.
"The only information that your office has made public during these timeframes is a one-page summary of your Madoff investigations, as found in your most recent semiannual report to Congress for the period ending on March 31," Kanjorski wrote in a letter on Monday. "While this brief discussion provided some helpful insights, I found it an inadequate response to my earlier requests and your prior public commitments."
It's time to stop the extraordinary intervention into the economy now that the goals of that work are beginning to show success, Chamber of Commerce CEO Thomas Donohue said Sunday.
"This is a most extraordinary time," Donohue said on "Fox News Sunday," where he defended the Chamber's new Campaign for Free Enterprise, announced this past week.
"It's time to say, 'We've gone there, but now it's time to stop,'" he said.
Donohue said the Chamber's campaign is "positive," and represents the cornerstone of the business group's beliefs. In his words, the campaign is about "tak[ing] a breath and come back."
The Chamber leader castigated the Obama administration's proposed regulations on executive compensation, as well as the Employee Free Choice Act (EFCA), the labor legislation to which his organization has long been opposed.
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