The Wall Street Journal
President Barack Obama used a Manhattan speech to urge top banking executives to back his sweeping overhaul of financial-market rules, while in Washington the bill gained steam as cracks in the Republican opposition improved its prospects in Congress.
Two years after a campaign speech at Cooper Union that spelled out his vision for Wall Street, Mr. Obama pressed his case to an audience that included wary finance executives. The president's call for their cooperation lacked the sharpness of his recent barbs and references to "fat cat bankers." Instead, he suggested the "titans of industry" join a legislative push that is in its final stages.
"Ultimately, there is no dividing line between Main Street and Wall Street. We will rise or we will fall together as one nation," Mr. Obama told the audience.
Appearing just up the road from Wall Street Thursday, Mr. Obama hoped to raise the political pressure and seal the deal. Among those in the audience at Cooper Union's historic Great Hall were Goldman Sachs Chief Executive Lloyd Blankfein and President Gary Cohn, who sat impassively as the president pressed bankers to call off "the furious effort of industry lobbyists to shape this legislation to their special interests."
In Washington, senators intensified bipartisan negotiations aimed at producing legislation that could be supported by members in both parties. Timing for a possible agreement was uncertain, but Senate Banking Chairman Chris Dodd (D., Conn.) and Alabama Sen. Richard Shelby, the panel's senior Republican, appeared committed to closing a deal.
Internal GOP divisions improved Democrats' chances of securing another of their big domestic priorities: a bill they could tout as addressing the causes and aftermath of the financial crisis. A big test could come as soon as Monday, when Republicans likely will need all 41 of their senators to stop floor debate on the bill.
The Securities and Exchange Commission's civil-fraud action against Goldman Sachs filed last week appears to have supercharged Mr. Obama's legislative push, just as the implosion of WorldCom all but ensured passage of the Sarbanes Oxley corporate-governance law in 2002.
Nerves appeared to be fraying among Republicans faced with the increasingly unappetizing prospect of opposing new curbs on Wall Street. At a contentious meeting of GOP senators Wednesday, some expressed concern about Mr. Shelby's talks with Mr. Dodd. According to people familiar with the meeting, Arizona Sen. John McCain questioned why the Senate was debating derivatives trading, something he ventured few of them understood, while huge numbers of homeowners in his state were struggling to hang on to their houses.
New Hampshire Sen. Judd Gregg responded that if Republicans don't unify against the bill, Congress could pass legislation that would chase the derivatives industry overseas and into even darker corners.
Republican aides said the party faced a dilemma: It could sign on to a bill that they and many of their constituents won't like, or watch a bill pass with them largely on the sidelines and give Democrats an issue to run on in the fall.
Senate Majority Leader Harry Reid (D., Nev.) sought to begin formal debate on the bill using a fast-track procedure that requires all senators to agree. Senate Minority Leader Mitch McConnell (R., Ky.) objected, setting up a likely showdown vote early next week and a deadline for the Dodd-Shelby talks.
The proposed legislation seeks to revamp almost every area of finance, from trading to borrowing to lending and investing, with the ultimate goal of forestalling another credit crisis. The federal government would get the power to seize teetering financial giants and dismantle them, just as the Federal Deposit Insurance Corporation now seizes failing banks. It would create a financial consumer regulator, boost the strength and budget of the SEC and impose new rules on the trading of derivatives, the complex financial instruments that helped bankrupt Lehman Brothers and nearly wiped out American International Group Inc.
The legislation also would reach into areas unrelated to the financial crisis, such as the relationship between corporations' shareholders and their boards, and the role of investors in start-up businesses. Shareholders would get a "say on pay"—a nonbinding vote to ratify the compensation of publicly traded companies' top executives. And the SEC would be required to raise the threshold for so-called angel investors to qualify for "accredited investor status," to take into account price inflation since the standard was set in 1982. The Angel Capital Association said that could eliminate more than two-thirds of accredited investors who invest directly in start-ups and young small businesses.
Opponents say the bill would entrench, not end, government bailouts of companies. The Senate measure includes a $50 billion pool, funded by the financial industry, to be used for unwinding a teetering financial giant. Some Republicans say firms would see that as "implied insurance" that would bail them out if needed, and because the fund is insufficient, taxpayers would be on the hook for any additional costs. In constraining financial firms, they say, the new rules would also crimp access to credit.
Mr. Obama didn't threaten to veto the bill if it didn't meet his standards, as he did during his State of the Union address and again as recently as a few days ago.That could be because the Senate legislation appears to reflect all of his major priorities, as aides have fought off many of the changes he found objectionable.
In Thursday's speech, Mr. Obama dodged discussing elements of the bill that might change, including state regulators' power over national banks and certain provisions designed to beef up the clout of company shareholders that Republicans strongly oppose.
He also suggested that certain companies could be shielded from rules that would redraw the market for derivatives, especially those that use the instruments to hedge exposure to fluctuating prices of commodities. By making that distinction clear, Mr. Obama could win over senators who are concerned about the breadth of the proposed curbs.
"The only people who ought to fear the kind of oversight and transparency that we're proposing are those whose conduct will fail this scrutiny," he said.
While the crowd, comprising mostly students and supporters, was largely receptive, the Wall Street executives filling the first three rows were considerably more subdued. Their hands remained in their laps when the president spoke of a bank fee to recover outstanding bailout funds and his plea to call off the industry lobbyists.
J.P. Morgan Chase & Co. CEO Jamie Dimon, a longtime Democratic supporter who has grown frustrated with Washington, was in Chicago receiving an award and didn't attend. Other big financial firms represented included Barclays, Morgan Stanley and Credit Suisse.
Key issues remain unresolved in Washington, and tensions continued to bubble over.
Shuttling between negotiating sessions, Mr. Shelby said he hadn't heard the president's remarks, and didn't see any immediate impact on efforts to piece together a bipartisan bill. "What'd he do, give them a lecture?" he scoffed at midday. "We're down in the weeds dealing with serious subject matter."
Two years after a campaign speech at Cooper Union that spelled out his vision for Wall Street, Mr. Obama pressed his case to an audience that included wary finance executives. The president's call for their cooperation lacked the sharpness of his recent barbs and references to "fat cat bankers." Instead, he suggested the "titans of industry" join a legislative push that is in its final stages.
"Ultimately, there is no dividing line between Main Street and Wall Street. We will rise or we will fall together as one nation," Mr. Obama told the audience.
Appearing just up the road from Wall Street Thursday, Mr. Obama hoped to raise the political pressure and seal the deal. Among those in the audience at Cooper Union's historic Great Hall were Goldman Sachs Chief Executive Lloyd Blankfein and President Gary Cohn, who sat impassively as the president pressed bankers to call off "the furious effort of industry lobbyists to shape this legislation to their special interests."
In Washington, senators intensified bipartisan negotiations aimed at producing legislation that could be supported by members in both parties. Timing for a possible agreement was uncertain, but Senate Banking Chairman Chris Dodd (D., Conn.) and Alabama Sen. Richard Shelby, the panel's senior Republican, appeared committed to closing a deal.
Internal GOP divisions improved Democrats' chances of securing another of their big domestic priorities: a bill they could tout as addressing the causes and aftermath of the financial crisis. A big test could come as soon as Monday, when Republicans likely will need all 41 of their senators to stop floor debate on the bill.
The Securities and Exchange Commission's civil-fraud action against Goldman Sachs filed last week appears to have supercharged Mr. Obama's legislative push, just as the implosion of WorldCom all but ensured passage of the Sarbanes Oxley corporate-governance law in 2002.
Nerves appeared to be fraying among Republicans faced with the increasingly unappetizing prospect of opposing new curbs on Wall Street. At a contentious meeting of GOP senators Wednesday, some expressed concern about Mr. Shelby's talks with Mr. Dodd. According to people familiar with the meeting, Arizona Sen. John McCain questioned why the Senate was debating derivatives trading, something he ventured few of them understood, while huge numbers of homeowners in his state were struggling to hang on to their houses.
New Hampshire Sen. Judd Gregg responded that if Republicans don't unify against the bill, Congress could pass legislation that would chase the derivatives industry overseas and into even darker corners.
Republican aides said the party faced a dilemma: It could sign on to a bill that they and many of their constituents won't like, or watch a bill pass with them largely on the sidelines and give Democrats an issue to run on in the fall.
Senate Majority Leader Harry Reid (D., Nev.) sought to begin formal debate on the bill using a fast-track procedure that requires all senators to agree. Senate Minority Leader Mitch McConnell (R., Ky.) objected, setting up a likely showdown vote early next week and a deadline for the Dodd-Shelby talks.
The proposed legislation seeks to revamp almost every area of finance, from trading to borrowing to lending and investing, with the ultimate goal of forestalling another credit crisis. The federal government would get the power to seize teetering financial giants and dismantle them, just as the Federal Deposit Insurance Corporation now seizes failing banks. It would create a financial consumer regulator, boost the strength and budget of the SEC and impose new rules on the trading of derivatives, the complex financial instruments that helped bankrupt Lehman Brothers and nearly wiped out American International Group Inc.
The legislation also would reach into areas unrelated to the financial crisis, such as the relationship between corporations' shareholders and their boards, and the role of investors in start-up businesses. Shareholders would get a "say on pay"—a nonbinding vote to ratify the compensation of publicly traded companies' top executives. And the SEC would be required to raise the threshold for so-called angel investors to qualify for "accredited investor status," to take into account price inflation since the standard was set in 1982. The Angel Capital Association said that could eliminate more than two-thirds of accredited investors who invest directly in start-ups and young small businesses.
Opponents say the bill would entrench, not end, government bailouts of companies. The Senate measure includes a $50 billion pool, funded by the financial industry, to be used for unwinding a teetering financial giant. Some Republicans say firms would see that as "implied insurance" that would bail them out if needed, and because the fund is insufficient, taxpayers would be on the hook for any additional costs. In constraining financial firms, they say, the new rules would also crimp access to credit.
Mr. Obama didn't threaten to veto the bill if it didn't meet his standards, as he did during his State of the Union address and again as recently as a few days ago.That could be because the Senate legislation appears to reflect all of his major priorities, as aides have fought off many of the changes he found objectionable.
In Thursday's speech, Mr. Obama dodged discussing elements of the bill that might change, including state regulators' power over national banks and certain provisions designed to beef up the clout of company shareholders that Republicans strongly oppose.
He also suggested that certain companies could be shielded from rules that would redraw the market for derivatives, especially those that use the instruments to hedge exposure to fluctuating prices of commodities. By making that distinction clear, Mr. Obama could win over senators who are concerned about the breadth of the proposed curbs.
"The only people who ought to fear the kind of oversight and transparency that we're proposing are those whose conduct will fail this scrutiny," he said.
While the crowd, comprising mostly students and supporters, was largely receptive, the Wall Street executives filling the first three rows were considerably more subdued. Their hands remained in their laps when the president spoke of a bank fee to recover outstanding bailout funds and his plea to call off the industry lobbyists.
J.P. Morgan Chase & Co. CEO Jamie Dimon, a longtime Democratic supporter who has grown frustrated with Washington, was in Chicago receiving an award and didn't attend. Other big financial firms represented included Barclays, Morgan Stanley and Credit Suisse.
Key issues remain unresolved in Washington, and tensions continued to bubble over.
Shuttling between negotiating sessions, Mr. Shelby said he hadn't heard the president's remarks, and didn't see any immediate impact on efforts to piece together a bipartisan bill. "What'd he do, give them a lecture?" he scoffed at midday. "We're down in the weeds dealing with serious subject matter."
