White House and Democrats Join to Press Case on Financial Controls

The White House and Democratic Congressional leaders said Wednesday that they would press forward with legislation to tighten regulation of the nation’s financial system. Rebuffing Republican criticism, the Democrats effectively dared the minority party to side with Wall Street by opposing the measure.

After a contentious meeting at the White House between President Obama and Congressional leaders from both parties, the Senate majority leader, Harry Reid of Nevada, accused Republicans of once again obstructing every effort by Democrats to govern. He expressed confidence that he could win the 60 votes needed to advance the bill.

President Barack Obama (C) speaks during a meeting on financial reform. Obama and Vice President Joe Biden met with Speaker Nancy Pelosi (2ndL), Senator Harry Reid(R), Senator Mitch McConnell, Congressman John Boehner(L), and Congressman Steny Hoyer, focusing to reform Wall Street.
Jewel Samad | AFP | Getty Images
President Barack Obama (C) speaks during a meeting on financial reform. Obama and Vice President Joe Biden met with Speaker Nancy Pelosi (2ndL), Senator Harry Reid(R), Senator Mitch McConnell, Congressman John Boehner(L), and Congressman Steny Hoyer, focusing to reform Wall Street.

“This is the same stall we got on health care,” Mr. Reid said after the meeting, standing on the driveway outside the West Wing.

Senior Democrats said the bill could reach the floor as soon as next week. And while Senate Republicans, if they remain united, could filibuster, Democrats said they were calculating that a number of Republicans — especially those up for re-election — would not cast a vote appearing to favor hedge funds and banks over average Americans.

It would take just one Republican to give Mr. Reid the 60 votes needed to overcome a filibuster and open debate. And Democrats were looking at numerous potential defectors, given public outrage over the return of huge Wall Street paydays.

They include the centrist Maine senators, Susan Collins and Olympia J. Snowe; two senators who are retiring after this year, George V. Voinovich of Ohio and Judd Gregg of New Hampshire; and Senator Bob Corker of Tennessee, who helped draft the bill and voiced optimism on Wednesday that a deal could be reached. In addition, a number of Republicans facing re-election could find it hard to oppose the bill, including Senators Richard Burr of North Carolina, Charles E. Grassley of Iowa and John McCain of Arizona.

At the White House meeting, Mr. Obama urged Congressional leaders to reach a bipartisan deal. But Mr. Obama also pushed back forcefully against Republican criticism, as did other Democrats in floor speeches and news conferences at the Capitol. The White House also made clear that the president’s interest in a bipartisan bill had its limits.

“I am absolutely confident that the bill that emerges is going to be a bill that prevents bailouts. That’s the goal,” Mr. Obama said before the start of the meeting, directly answering assertions by the Senate Republican leader, Mitch McConnell of Kentucky, that the bill would encourage, rather than prevent, future taxpayer bailouts of financial companies. As Mr. Obama spoke, Mr. McConnell sat impassively nearby in the Cabinet Room.

Later, in a particularly pointed statement, the White House press secretary, Robert Gibbs, said Mr. Obama would not let the bill be thrown off course.

“The president reiterated his belief that we are open to ideas and eager to work with anyone who is willing to work with us regardless of party,” Mr. Gibbs said. “He also made clear that bipartisanship should not be equated with an openness to lobbyists, loopholes and special interest carve outs and that he would be unwilling to negotiate on some key issues, and that he could not accept bad policy in pursuit of bipartisanship.”

The legislation seeks to contain the risky practices that led to the financial collapse in 2008 and the worst recession since the Great Depression. It would give the Federal Reserve oversight of the largest and most interconnected financial institutions, those with at least $50 billion in assets.

And it would let the Treasury secretary — with support from regulators and the approval of a panel of three bankruptcy judges — take over any company that posed systemic risk to financial stability, and essentially force the company out of business.

At a lengthy briefing at the White House, the Treasury secretary, Timothy F. Geithner, said he was confident a bill would be approved. “This is going to be the most sweeping set of reforms we have contemplated, as a country, since those put in place after the Great Depression,” he said. “We do not want to have the American taxpayer ever be in the position again where they’re forced to choose between putting billions of dollars of taxpayers’ money at risk or facing catastrophic collapse of the financial system.”

Facing reporters outside the White House, Mr. McConnell repeated his assertion that the Senate bill would encourage bailouts by creating a $50 billion fund essentially to dismantle companies that are so big their failure would endanger the economy.

He demanded further negotiations. “My message to the president, quite simply, was, ‘Let’s get back to the table,’ ” he said.

But Mr. McConnell also struggled to answer accusations that Republicans were doing the bidding of big banks. Pressed by reporters to explain why major Wall Street companies were so strongly opposed to the legislation if it would guarantee future bailouts for them, Mr. McConnell did not answer directly but said that community banks in his home state of Kentucky also opposed the bill.

Asked directly if Republicans were acting on behalf of big banks, Mr. McConnell replied, “I’d say that’s inaccurate.”

The Obama administration has not supported the creation of the $50 billion fund. Some administration officials and Republican lawmakers suggested they could easily agree on that issue, perhaps leading to a wider accord.

While the focus has been on how the bill will deal with failing companies, some officials said there were more serious disagreements over other complex issues in the legislation, including how to regulate complex financial instruments, particularly derivatives tied to commodities.

At his briefing, Mr. Geithner urged reporters to draw attention to the derivatives issue to help expose efforts “to weaken, to exempt, to carve people out of those basic protections.”

Senator Corker said Mr. McConnell was right to complain about “some loopholes in this bill.” But he also warned of overheated rhetoric.

“Like what happened during the health care debate,” Mr. Corker said on the Senate floor, “some of it is sort of being blown out of proportion.” Of the loopholes, he added, “I think we could fix those in about five minutes.”

Mr. Corker also urged that the $50 billion fund be eliminated. “If people think this prefund is something that looks like a bailout, let’s drop it,” he said. “Let’s get rid of it. Let’s end it.”

Some Democrats said the Republicans were simply misrepresenting the legislation.

Senator Christopher J. Dodd, Democrat of Connecticut, the lead sponsor of the bill, denounced Mr. McConnell’s criticism in an angry floor speech.

“It’s a naked political strategy,” Mr. Dodd said. “The bill as drafted ends bailouts. Nothing could be more clear.”

Jackie Calmes, Sewell Chan and Edward Wyatt contributed reporting.