White House renews push for financial industry overhaul
Consumer protection agency, bank trading rules called crucial
WASHINGTON - The Obama administration redoubled its efforts yesterday to overhaul the nation’s financial industry regulations, saying that it would not back down from a plan to restrict the trading activities of banks and to create a consumer agency to regulate financial products.
In an attempt to thwart fierce lobbying against those measures, among others, Treasury Secretary Timothy Geithner summoned leaders of the US Chamber of Commerce, the American Bankers Association, the Financial Services Forum, and other groups to a meeting tomorrow at which he will urge them not to obstruct the legislative effort.
The chairman of the Senate Banking Committee, Christopher Dodd, a Connecticut Democrat who is drafting a new version of the regulatory overhaul, met again yesterday with Senator Bob Corker, Republican of Tennessee, in the hope of arriving at a bipartisan measure.
Other provisions in contention include whom to exempt from new regulations governing the market for over-the-counter derivatives and how to dissolve financial companies before they pose systemic risk to the economy.
The White House renewed its support for a ban on banks that take deposits from making market bets with their own money - a practice known as proprietary trading.
But others involved said it might be difficult to persuade the Senate to go along with the idea, known as the Volcker rule. In December, the House adopted a plan with a provision to let federal regulators curb proprietary trading if they deem it too risky for banks.
Representative Paul E. Kanjorski, Democrat of Pennsylvania, who wrote that provision, said “the Volcker rule grows out of my amendment’’ and that they share an aim: “We’re trying to reestablish credibility in the marketplace for financial institutions. They have, through this crisis, rightly or wrongly so, gained a dangerous reputation.’’
But Kanjorski acknowledged it had been tough to push his amendment through the House, and said the Volcker rule went even further, because it gave less discretion to regulators.
W. Michael Blumenthal was one of five former Treasury secretaries who this week endorsed the Volcker rule.
“For any reform to be effective, it is important that we go back to separating, in some function or other, the normal banking activities of commercial banks from the trading activities,’’ he said. “The mixing of those two has gotten us into trouble, and it’s important to fix it.’’