Obama takes tough tone with Wall Street as he seeks regulator boost

"The American free market system is the most powerful engine of economic growth and job creation the world has known," his budget stated. "But the free market was never meant to give the financial system free license to take irresponsible and reckless risks of such a size that they can harm our economy and leave taxpayers with the bill."

In his fiscal 2012 budget request, Obama called for a "financial crisis responsibility fee" that would be paid by the nation's largest financial institutions as a way to repay taxpayers for their bailouts, estimating it would reap about $30 billion over 10 years. That fee is back again in the 2013 version — now twice as large — tapping the finance industry's titans for $61 billion.

"Shared responsibility requires that the largest financial firms pay back the taxpayer for the extraordinary support they received as well as to discourage excessive risk taking," the White House stated in its new budget proposal.

It is unlikely such a proposal will be met with open arms by Republican lawmakers in Congress, who argue such fees are really just higher taxes by another name.

The president is also ready to pick another fight with GOP appropriators over how much funding two agencies tapped with implementing broad swaths of the Wall Street reform law should receive. The president called for substantially higher budgets for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in his 2012 request as the agencies worked to implement Dodd-Frank. Instead, Republicans responded by trying to slash the budgets of those agencies.

In his latest request, the president is seeking $1.56 billion for the SEC, up from the $1.43 billion he requested for fiscal 2012, and even more than the $1.19 billion the agency actually received in 2011. The budget increase was due primarily to an effort to compensate for the unfilled budget request for fiscal 2012. The SEC's budget does not contribute to the deficit because it is funded through fees assessed on the financial industry.

Dodd-Frank gave the CFTC the task of imposing regulations on the financial derivatives industry. In his 2013 request, the president is seeking the same amount he requested for fiscal 2012 — $308 million, a 62 percent increase from its actual 2011 allocation of $192 million. 

The president's budget request also calls on allowing the CFTC to collect its budget via industry fees, similar to the SEC and other financial regulators. The agency's budget is currently set by congressional appropriators.

While the president was unflinching in his support for Wall Street reform, his budget request also showed the massive effort to save the industry from collapse was getting more expensive. In the fiscal 2012 proposal, the White House estimated that the Troubled Asset Relief Program (TARP) would add about $48 billion to the deficit. In the 2013 request, the cost had grown to $68 billion — roughly two-thirds of that cost would be spent on programs meant to relieve the still-ailing housing sector. However, both figures fall well short of the initial estimated price tag of the program, which was over $350 billion.

The president's budget request marks the latest in a recent run by the White House of getting tougher with Wall Street, beginning with his decision to skirt GOP opposition and recess appoint Richard Cordray to be director of the Consumer Financial Protection Bureau (CFPB). He followed that January move up with harsh rhetoric for the financial sector during his State of the Union address in mounting a full-throated defense of his initiatives.

"I will not go back to the days when Wall Street was allowed to play by its own set of rules," he said, running down major provisions of Dodd-Frank. "The rest of us aren't bailing you out ever again."

Obama also used that speech to announce a new regulator unit devoted to investigating financial crimes, especially those involving mortgages. He also called on Congress to pass legislation substantially increasing the amount of penalties regulators can levy on Wall Street's bad actors.