NU Online News Service, April 14, 3:37 p.m. EDT
WASHINGTON–The Obama administration has made clear it will support the Senate version of a financial services reform bill as the measure appears to be nearing a floor vote.
In comments at a White House meeting today with the Senate and House leadership of both parties, President Barack Obama said, "I am actually confident that we can work out an effective bipartisan package that assures that we never have 'too big to fail' again."
The meeting was prompted by strong comments at midweek by Sen. Mitch McConnell, R-Ky., Senate minority leader, and a response by Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee.
In his response today, Sen. Dodd said he will start the maneuvers needed to bring his bill to the Senate floor "in the next several days."
Sen. McConnell, meanwhile, said the legislation effectively "authorizes permanent bailouts" via a number of provisions. He also singled out a provision that would collect fees from large financial institutions to create a $50 billion fund that woulc insure against the failure of huge financial concerns.
Democrats argue that such a fund would be used so taxpayers don't have to cover the cost of dismantling a large, failing financial institution, akin to what happened with Lehman Bros. in September 2008.
Sen. McConnell's comments yielded a strong rebuke from administration officials and Sen. Dodd.
Sen. Dodd is the primary author of the Senate version of the bill. In comments on the Senate floor today, he defended his legislation, saying the bill "extends oversight to dangerous nonbank financial companies like AIG that could pose a risk to our financial stability."
He also said the measure "eliminates the Federal Reserve's ability to prop up individual institutions using its 13(3) authority, another way to stop banks from thinking they could be bailed out."
"The Fed's lending authority is strictly restricted, not expanded as some have claimed," he argued, commenting that "our bill sets up a predictable, orderly and safe process for shutting down dangerous Wall Street firms that fail without endangering the entire economy. No financial firm will be 'too big to fail.'"
Sen. Dodd continued, "The largest Wall Street firms will have to put up money for a $50 billion fund to cover the costs of liquidating the failed financial firm, and any shortfall will be made up by the largest and riskiest financial firms."
Life and property and casualty companies won language in the legislation that exempts every insurance company with more than $50 billion in assets from pre-paying into the fund except for MetLife. MetLife must pay because it is a large bank holding company, with more than $425 billion in assets.
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