Banking/Financial Institutions

A $50 billion fund that would go toward unwinding failing financial institutions is still in play, a leading negotiator on the reform bill said Thursday. 

Sen. Mark Warner (D-Va.), a member of the Senate Banking panel and key negotiator on the fund, said he didn't think an agreement had been reached to remove the prepaid account that would be funded by big banks in order to avoid taxpayer exposure, during an interview today on MSNBC.

The fund is designed to provide capital so firms can be closed down or go into bankruptcy without using taxpayer money. 

Senate Republicans have said the fund was removed as part of negotiations to bring the overhaul legislation to the floor but new language has yet to emerge on the provisions. 

"We're trying to put some speed bumps on these large institutions -- added capital requirements, leverage requirements, trying to look at making sure that there's a whole new set of capital that would convert to equity if a bank got into a problem," Warner said. 

While there's plenty of hard work ahead, Warner predicted that the Senate could produce a bill that will get 75 votes. 

Treasury Secretary Timothy Geithner defended the Democrats' financial regulatory reform proposals from attacks that he said were false.

Geithner, speaking at a Senate subcommittee hearing Thursday, said that opponents of the Democrats' bill have "tried to convince that these reforms will either hurt Main Street, help Wall Street or both."

"Those arguments won't work because they're not true," Geithner said.

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President Barack Obama will deliver remarks Tuesday before some of the most powerful CEOs in the U.S.

White House Press Secretary Robert Gibbs said that the president will address the annual meeting in Washington next Tuesday of the Business Council, a group of public-minded chief executive officers.

"The president will discuss his efforts to spur job creation and rebuild our economy for years to come," Gibbs said in a statement. "He will also address the important role the business community plays in the fight to get the American people back to work."

Obama's speech comes against the backdrop of his push for lawmakers to approve financial regulatory reform legislation.

Among the group's top members include major financial players, according to a list of its 2009-10 leadership. JPMorgan CEO Jamie Dimon serves as a vice chairman, while health insurance executives Ronald Williams of Aetna and Angela Braly of WellPoint serve as members.

It's not clear whether or not the leadership information was up to date; the council's website lists now-resigned General Motors CEO Richard Wagoner as a vice chairman.

In addition to Obama, Treasury Secretary Tim Geithner will address the group on Tuesday, while Office of Management and Budget (OMB) Director Peter Orszag will deliver remarks on Wednesday.

Thousands of labor union members are planning a march on Wall Street in support of overhauling the financial system after the market closes Thursday. 

Those on Wall Street "haven't learned a lesson," AFL-CIO President Richard Trumka said this morning in a CNBC interview. 

He is asking for the financial sector to "pay their fair share" and replace the "11 million jobs" they killed, stop fighting efforts for regulatory reform and start lending to small and mid-sized banks to help create jobs. 

Earlier this week, Goldman Sachs CEO Lloyd Blankfein and Citi CEC Vikram Pandit, each said they support reform to make the market more transparent. 

Trumka suggested a financial tax or tax carried interest "at the same rate that you and I pay instead of having a guy that made $4 billion get taxed at half the rate you and I pay."

A transaction tax of a quarter of a penny would collect between $150 billion and $300 billion, he said. 

"They're back to business as usual. That's why we need Wall Street reform and that's why we want them to start paying for the jobs that they destroyed, 11 million of them."

Henry Paulson and Timothy Geithner are on tap to testify next week on the system of bank-like institutions and markets that operated outside the U.S. regulatory structure.

The former Treasury head and current secretary will appear May 6 before the Fiscal Crisis Inquiry Commission on Capitol Hill.

The commission is holding two days of hearings -- May 5 & 6 -- on the "Shadow Banking System" and will include testimony from Christopher Cox and William Donaldson, former heads of the Securities and Exchange Commission, along with former executives of Bear Stearns. 

Debate began Thursday on a financial regulatory reform bill and is expected to continue Friday and Monday with work on amendments starting Tuesday. 

Senate Banking and Housing and Urban Development Chairman Chris Dodd (D-Conn.) suggested to Senators to discuss amendments over the weekend to determine if those changes can be accepted or modified to keep time constraints on what is expected to be a long debate on the measure. 

The bill is still a work in progress and staff is still writing the language, Dodd said. 

Senate Banking ranking member Richard Shelby (R-Ala.) has gotten changes on 'too big to fail' provisions but he argues the measure would force derivatives trading to shift offshore and not allow any oversight and it "threatens the ability of companies to reduce risk." 

"I look forward to improving the deficiencies and shortcomings of the bill," Shelby said on the floor today. 

The fraud case against Goldman Sachs underscores the need for stronger fiduciary standards for brokers, two Senate Democrats said Thursday.

Democratic Sens. Robert Menendez (N.J.) and Daniel Akaka (Hawaii) support an amendment to financial overhaul legislation that would require a stronger fiduciary standard for brokers when they give advice to clients. They are dubbing their legislation the, "Honest Broker Amendment.

The amendment can be viewed here.

The role of private equity firms and U.S. manufacturing capacity will be the topic of a Senate panel hearing Thursday. 

The hearing will focus on "short-termism" in financial markets and how to create public policies to reward long-term economic growth, the Senate Banking Subcommittee on Economic Policy announced late Thursday evening.

Witnesses include James Rogers, president and CEO, Duke Energy; Damon Silvers, director of public policy and special counsel, AFL-CIO; Judith Samuelson, executive director, Aspen Institute Business and Society Program; and J.W. Verret, assistant professor of law, George Mason University School of Law. 

President Barack Obama congratulated Senate Republicans and Democrats for moving forward on a bill to reform Wall Street. 

"I'm very pleased," Obama told reporters flying back to Washington on Wednesday night. "This shouldn't have to be a partisan issue."

Debate begins Thursday on the bill and the president said he hoped that "we can get this done quickly."

Although he wouldn't comment on Goldman Sachs because of the pending civil suit, he did say "that most Americans might find some of the behavior of the big financial institutions out of whack with mainstream America," according to the pool report. 

He suggested more transparency in the financial system so that "we end up having a safer, more secure system."

Senate Democrats will drop a $50 billion fund in financial legislation that could be used to dissolve failing financial firms, a Republican aide said Wednesday.

Republicans had made the fund their top concern in the financial bill, and they held up the Senate from debating the bill in part over the provision.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.), the top Republican on the banking panel, said they had made significant progress in bipartisan talks about how to wind down failing financial firms. The Senate agreed Wednesday to open debate on financial reform after deciding the bipartisan talks had reached an impasse on other matters.

Shelby "secured assurance" on Wednesday that his concerns about the fund would be included in legislation offered on the floor by Dodd, the Republican aide said. Shelby's concerns were that the bailout fund be dropped from the bill, the aide said.

Dodd's spokeswoman, Kirstin Brost, declined to spell out the agreement between the two senators.

"Dodd agreed to work with Shelby," Brost said.