New York City Mayor Michael Bloomberg urged Congress to drop two of the most controversial parts of the Wall Street overhaul, arguing they would hurt the country and send jobs overseas.
In a letter to Congress, Bloomberg took aim particularly at provisions backed by Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) and Obama administration adviser Paul Volcker. Bloomberg, the billionaire former Wall Street executive and founder of Bloomberg LP, called both proposals "short-sighted." Bloomberg did not refer to Lincoln or Volcker by name.
Bloomberg said Lincoln's provision to separate conventional banking from derivatives dealing should be removed from the bill. "The prohibition would force swaps into less regulated entities, increasing systemic risk by pushing transactions into the very 'shadow market' which played such a large role in the recent crisis," Bloomberg said.
Bloomberg's letter comes as 43 centrist House Democrats urged lawmakers finalizing the regulatory bill to also remove the Lincoln provision. New York Democratic Reps. Mike McMahon and Gary Ackerman are also organizing the state congressional delegation to oppose the measure.
The Lincoln proposal aims to prevent federal emergency assistance from helping derivatives dealers. Lincoln clarified her provision this week to say umbrella bank holding companies could own derivatives dealers but only if they are separated from routine banking operations.
The issue is one of the most heavily lobbied aspects of the bill and is strongly opposed by the financial industry.
The Volcker rule would seek to bar commercial banks from engaging in proprietary trading, or trading for its own accounts rather than for its clients.
"Banning it here would only send those jobs to London, Hong Kong and other cities," Bloomberg said. "Limiting the capacity of banks to generate profits through proprietary trading will lead to decreased lending, which will hurt people trying to buy homes or invest in their small businesses."