WASHINGTON — President Obama accused Republicans on Friday of trying to carve out "special loopholes" for the financial sector in regulatory reform legislation and warned they would soon face a choice, whether to side with an unpopular industry or ordinary Americans.
His pointed comments came as all 41 Senate Republicans signed a letter criticizing a bill before the Senate to overhaul financial oversight. They said the measure would stifle the economy by giving the government "unlimited regulatory powers" and called on the administration to start a new round of negotiations. Republicans added that they have the votes to prevent Democrats from bringing the bill to the floor.
At the same time, the administration responded to an initiative from its left flank. Treasury Secretary Timothy Geithner sent a letter to Capitol Hill signaling his skepticism about a far-reaching measure unveiled Friday by Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark. Lincoln proposed banning big Wall Street banks from trading lightly regulated financial instruments known as derivatives. Geithner said he wants tough new rules as well, but stopped short of supporting an outright ban, which has gained traction among some liberal Democrats.
The efforts to steer the legislation along a centrist course are not only out of necessity — the White House needs at least one Republican and all Democrats in the Senate to overcome a filibuster — but also reflect the moderate views of many of Obama's senior economic advisers.
The bill headed to the Senate floor largely reflects their proposals, which would keep the structure of the financial system largely intact, with only a few wholesale changes, but impose clearer and tougher rules on business activities. Big banks, for instance, would have to set aside more capital to cover unexpected losses, money they otherwise could use to earn profits.
Increasingly, the president is bringing a sharp political edge to the accelerating debate. Speaking before a meeting with his Economic Recovery Advisory Board, Obama said he would like the bill to have bipartisan support. But he warned that "bipartisanship cannot mean allowing lobbyist-driven loopholes that put Americans at risk." He added that he would veto legislation that did not include controls on the U.S. derivatives market.