By Alexander Bolton - 04/18/10 10:56 PM EDT
Senate Democrats plan to forge ahead with a Wall Street reform bill this week, despite unified opposition from Senate Republicans.
A Democratic aide predicted that lawmakers could vote on a motion to proceed to the bill as soon as Wednesday and as late as Friday.
“We are united in our opposition to the partisan legislation reported by the Senate Banking Committee,” the lawmakers wrote in the letter to Senate Majority Leader Harry Reid (D-Nev.).
Even so, Dodd is “very eager to have a public debate on these issues,” said a Banking Committee spokeswoman. The panel filed its bill on Thursday evening.
The most controversial element of the bill is a $50 billion fund — that would be supplied by financial institutions — to provide for the orderly liquidation of troubled banks posing systemic risk to the markets.
Senate Republican Leader Mitch McConnell has argued that such a fund could lead to future taxpayer-supported bailouts because of provisions empowering federal officials to keep an ailing bank on life support.
McConnell argues the legislation would enable federal regulators to tap into government funds to keep a bank afloat if the $50 billion raised from the private sector proves insufficient.
Democrats counter that no taxpayer money would be put at risk.
“Sen. Dodd’s bill explicitly says the money that will go for any future bailout for any large institution because it failed has to come from the large institution, not the taxpayer,” said Sen. Charles Schumer (N.Y.), vice chairman of the Senate Democratic conference, who helped negotiate the bill.
The Republican push to eliminate the $50 billion bank liquidation fund received a boost last week from the White House, which may be trying to lower the partisan temperature in the Senate.
Senior Obama administration officials have urged Senate Democrats to drop the proposal.
But Democratic lawmakers disagree with President Barack Obama on this point. House Democrats have called for creating a $150 billion fund to wind down banks that threaten to drag down the financial markets.
Given the unified opposition from Senate Republicans and pressure from the White House, Democrats may relent and change the bill before proceeding to debate or amend it on the floor.
“As currently constructed, this bill allows for endless taxpayer bailouts of Wall Street and establishes new and unlimited regulatory powers that will stifle small businesses and community banks,” the Senate GOP conference wrote Friday.
But Republicans stopped short of pledging to filibuster the motion to begin debate on the Wall Street reform legislation.
McConnell had pushed colleagues to sign a stronger letter, according to GOP lawmakers, but scaled back after Sen. Susan Collins (R-Maine) declined to sign it.
Democrats believe they will be able to pressure Republicans to defect once the public debate begins.
“If Republicans want to allow the same Wall Street greed and excess that crippled our economy to continue, that is their choice,” Reid said in a statement Friday afternoon.
“But it is my hope that in the coming days they will spend less time writing letters and meeting with Wall Street executives, and more time helping us pass a bill that holds Wall Street accountable and protects consumers, investors and financial institutions,” Reid said.
Democrats believed their case was strengthened Friday when the Securities and Exchange Commission announced a fraud action against Goldman Sachs, one of the nation’s preeminent investment banks.
Sen. Jack Reed (R.I.), a senior Democrat on the Banking Committee, suggested Friday the names of three Republicans who could be persuaded to support the bill: Colllins, Tennessee Sen. Bob Corker and New Hampshire Sen. Judd Gregg.
Corker said last week that his concern about the ability of federal officials to keep troubled banks on life support instead of liquidating them could be easily solved.
“But the fact is, I think we could fix those in about five minutes,” he said on the floor last week.
Democrats, however, must also work to solidify support among their own ranks.
Sen. Ben Nelson (D-Neb.) said last week that he was withholding support for the legislation because of what he described as unnecessary regulations that would be placed on insurance companies.
Sens. Ted Kaufman (D-Del.) and Evan Bayh (D-Ind.) also voiced concerns.
Democratic leaders must also incorporate into the broad reform bill a proposal unveiled Friday by Sen. Blanche Lincoln (D-Ark.), chairman of the Senate Agriculture Committee, to regulate derivatives.
Lincoln says her proposal will bring “100-percent transparency” to the unregulated $600 trillion. The proposal is expected to receive a markup next week and could be added to the Senate bill as an amendment later in the debate.
Senate Democratic Whip Dick Durbin (D-Ill.) said late last week that it was “too soon” to say with any certainty that Democrats would have enough votes to quash a Republican filibuster on a motion to begin debate.
Democratic leaders, however, believe political momentum will build once Obama begins to weigh in more actively.
The president called on the Senate to act during his weekly address on Saturday.
“Every day we don’t act, the same system that led to bailouts remains in place – with the exact same loopholes and the exact same liabilities,” Obama said. “And if we don’t change what led to the crisis, we’ll doom ourselves to repeat it.”
Obama urged Democrats and Republicans to resolve their differences but made clear that he will become impatient if the negotiations drag on.
"So my hope is that we can put this kind of politics aside. My hope is that Democrats and Republicans can find common ground and move forward together.
“But this is certain: one way or another, we will move forward,” Obama said. “This issue is too important. The costs of inaction are too great.”