The intensifying rhetoric surrounding a proposed overhaul of the financial industry has both parties claiming to best represent the interests of taxpayers against what President Obama once called “fat cat” bankers.
But deep ties between Washington politicians and the financial industry complicate — if not undermine — both parties' efforts to appear the more virtuous.
“This is reform that will force banks and financial institutions to pay for bad decisions that they make — and not have taxpayers pay for those bad decisions,” Obama said. “And that means no more bailouts.”
A bill that would overhaul the financial industry cleared the House and awaits consideration in the Senate, where Republicans are opposing the House version and demanding a role in crafting a bipartisan measure.
The administration last week was hoping that fraud charges filed by federal regulators against Goldman Sachs would renew momentum for their regulatory overhaul bill — a reform measure Democrats want to campaign on in the fall.
To that end, the Securities and Exchange Commission lawsuit was touted as part of the government's effort to hold the industry accountable for its role in the nation's economic meltdown.
But Goldman Sachs executives were top contributors to Obama's 2008 campaign, and the company also contributes heavily to members of Congress, including members of the Senate Banking, Housing and Urban Affairs Committee.
The apparent contradiction between the contributions and the White House push for reform might almost give Obama political cover — but Republicans are balking on the bill, claiming it creates a permanent bailout fund for the industry.
“It is a bill that actually guarantees future bailouts of Wall Street banks,” Senate Minority Leader Mitch McConnell, R-Ky., said after meeting with Obama last week. “It will lead to endless taxpayer bailouts of Wall Street banks.”
Both parties, and especially Obama, are eager to distance themselves from the whole issue of bailouts after the horrible public relations surrounding the government's bailout of the financial sector.
But McConnell's own campaign funding is derived largely from the financial sector — leading to charges from Democrats that he is working at the behest of the industry to undermine reform.
All 41 Republican senators are opposing the bill, which has the White House rethinking a $50 billion liquidation fund included in the House version of the measure — the same provision that sparked claims of a permanent bailout.
At the same time, the White House used its blog to flog Republicans for falsely linking the reform bill to bailouts — noting the tactic came from Frank Luntz, a Republican political consultant and focus group enthusiast who outlined the idea in a January strategy memo.
Determined to win on this latest reform measure, a follow-up to health care reform, Obama acidly compared the forces trying to defeat financial overhaul with piranhas — and said Republicans have to make a choice.
“It's no surprise that the financial institutions that profit from the status quo have sent hordes of lobbyists to kill reform,” Obama said. “It's like throwing a piece of meat into a piranha tank — they're going to race to see how fast they can tear it apart.”
He added, “The choice is going to be very simple between the special interests and the American people.”