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Obama pushes case for bank reform Obama pushes case for bank reform
(about 2 hours later)
President Obama will make a speech to financial leaders in New York later to push the case for more government regulation of big banks.President Obama will make a speech to financial leaders in New York later to push the case for more government regulation of big banks.
A White House spokesperson said the President would argue that, without new rules, there could be a repetition of the banking crisis. A White House spokesperson said the president would argue that, without new rules, there could be a repetition of the banking crisis.
He will tell bankers that it is in their interests to have new rules and they should not fight them. He will tell bankers it is in their interests to have fresh regulation and they should not fight them.
BBC's North America editor said it was "part-lecture, part-appeal" to bankers. The BBC's North America editor said it was "part-lecture, part-appeal".
ANALYSIS By BBC North America Editor Mark Mardell ANALYSIS By BBC North America editor Mark Mardell
This will be part-lecture, part-appeal to Wall Street and 100% political strategy.This will be part-lecture, part-appeal to Wall Street and 100% political strategy.
He'll tell financiers that it is in their interests to have new rules , not to fight them and that they should lean on politicians in Washington and urge them to pass the new legislation. He'll tell financiers that it is in their interests to have new rules, not to fight them and that they should lean on politicians in Washington and urge them to pass the new legislation.
Despite a lot of intense wooing not a single Republican in the Senate plans to vote for the new laws at the moment. But they all understand what the President is up to. If they vote against his plan, when it comes to the Senate and House elections in the Autumn, they will be painted as the party that backed their wealthy friends on Wall Street, and put at risk the people on Main Street. Despite a lot of intense wooing not a single Republican in the Senate plans to vote for the new laws at the moment. But they all understand what the president is up to. If they vote against his plan, when it comes to the Senate and House elections in the Autumn, they will be painted as the party that backed their wealthy friends on Wall Street, and put at risk the people on Main Street.
A bill proposing tighter regulation, which has five major themes, is due to be debated in the the US Upper House, the Senate, next week.
It was approved by the Lower House, the House of Representatives, in December.
The proposed rules would include a new body to safeguard consumers' rights - a consumer protection agency at the US central bank, the Federal Reserve - which would have powers to regulate all lending.The proposed rules would include a new body to safeguard consumers' rights - a consumer protection agency at the US central bank, the Federal Reserve - which would have powers to regulate all lending.
The bill also includes the formation of a nine-member Financial Stability Oversight Council, which would have powers to break up large companies if they were deemed to pose a threat to the stability of the financial system.The bill also includes the formation of a nine-member Financial Stability Oversight Council, which would have powers to break up large companies if they were deemed to pose a threat to the stability of the financial system.
It also suggests limiting banks' involvement in proprietary trading - where they trade their own money rather on behalf of investors - and their investments in hedge funds and private equity funds. The proposals include setting up a $50bn fund (£32.5bn) to assist with orderly liquidation. But Republicans see this as still allowing taxpayer bail-outs, arguing that any fund could borrow from the Treasury.
The bill also suggests limiting banks' involvement in proprietary trading - where they trade their own money rather than that of investors - the so-called Volcker Rule, after the former head of the Federal Reserve who is now an adviser to President Obama.
And it proposes limiting banks' investments in hedge funds and private equity funds, and more say for investors on executive pay.
Awkward spotAwkward spot
President Obama's fellow Democrats support the proposed bill, but Republicans largely view it as just more government bureaucracy. President Obama has a 59-41 Democrat majority over Republicans in the Senate, but that is one vote short of the number needed.
Republicans largely view the bill as just more government bureaucracy, and they are pushing for parts of it to be changed.
They say the plan would enshrine government bail-outs of big companies.They say the plan would enshrine government bail-outs of big companies.
But full-on opposition to the bill puts them in a awkward spot, says North America Editor Mark Mardell. But full-on opposition to the bill puts them in a awkward spot, says BBC North America editor Mark Mardell.
"If they vote against it they will be painted as the party that backed their wealthy friends on Wall Street, and put at risk the people on Main Street.""If they vote against it they will be painted as the party that backed their wealthy friends on Wall Street, and put at risk the people on Main Street."
If he does succeed in attracting at least the one Republican vote and gets it through the Senate, it will still have to be reconciled in joint committee with the House, before it goes to the president for his signature and becomes law.