By Silla Brush - 04/13/10 11:47 PM EDT
After weeks of playing defense, congressional Republican leaders on Tuesday fired back at the White House on financial regulatory reform, calling it another bailout bill.
House Republican Conference Chairman Mike Pence (Ind.), in a speech to New York hedge funds, called Democratic financial bills “TARP II,” and said they would lead to future bailouts. The reference is to the $700 billion Troubled Asset Relief Program used to bail out Wall Street.
Back in Washington, Senate Minority Leader Mitch McConnell (R-Ky.) took to the Senate floor and said the pending bill in the Senate “not only allows for taxpayer-funded bailouts of Wall Street banks, it institutionalizes them.”
Hours later, the Treasury Department fought back against the Republican criticisms, particularly McConnell’s.
Deputy Treasury Secretary Neal Wolin sought to refute several arguments made by the senator. McConnell, for example, argued that the bill’s $50 billion industry-supported fund wouldn’t be enough to cover the costs of future crises and that taxpayers would be left to foot the rest of the bill.
“The legislation makes clear that if the $50 billion fund is insufficient, then the institutions themselves, the industry, will be assessed to make up the difference,” Wolin said.
“There are no more taxpayer-funded bailouts. Period,” he said.
The attacks and counterattacks come as the White House, fresh off its healthcare reform triumph, is pushing the Senate to pass a regulatory reform bill. While no Republicans backed health reform, Republicans in the upper chamber acknowledge that the regulatory bill, dubbed a Wall Street reform measure by Democrats, will attract some GOP backing.
Republicans say they are interested in striking a deal, but believe the White House is not acting in good faith.
Addressing reporters on Tuesday, McConnell said, “This effort by the White House to turn this into a completely partisan bill ought to stop.”
Congressional Democrats and the White House have been very sensitive to “bailout” criticisms, and Tuesday was no exception.
The problem of how to dissolve failing financial firms and end the notion that some firms are too big to fail is among the most contentious aspects of the financial overhaul bill.
But a rupture emerged Tuesday on the section to overhaul the multitrillion-dollar market for financial derivatives.
Lobbyists from across the financial, energy and agriculture industries have been looking toward the Senate Agriculture Committee to craft a broad exemption for “end users” of derivatives. The Agriculture Committee has jurisdiction over the Commodity Futures Trading Commission (CFTC).
The groups have pushed for an exemption for companies, like airlines or power utilities, that use derivatives to hedge against price fluctuations.
They argue the regulations would force them to put up capital to cover potential losses and thereby shift money away from their traditional business.
Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) said in a letter on Tuesday that she would pursue a “narrow exemption” and said that it would be “surgical” in scope.
“Only commercial firms which are solely hedging their own commercial risks should be able to use some limited exemption,” Lincoln wrote to Sens. Maria Cantwell (D-Wash.), Dianne Feinstein (D-Calif.), Byron Dorgan (D-N.D.) and Olympia Snowe (R-Maine). “It is very clear to me that the opportunities for abuse in this area are readily apparent.”
Some consumer advocates have argued in favor of mandatory exchange trading for all derivatives and have warned of potential abuse with a broad exemption.
Lincoln said she did not agree that exchange trading would be appropriate for all transactions, and said she would give the CFTC authority to decide which swaps to put on exchanges.
Wolin cast aside concerns that the administration had stepped in to scuttle a deal between Democrats and Republicans on the panel.
“It’s not like we’re meddling,” Wolin said. “We have been asked by both Democrats and Republicans for our views. And we have been very consistent.”
Vicki Needham contributed to this article.