Banking regulators and Senate Democrats warn against repeal of financial reform law
Key banking regulators and Senate Democrats warned against Republican efforts to repeal all or some provisions of the Wall Street reform law enacted last year, saying the country couldn't afford to return to a system that failed to stop the financial crisis.
"It would be very harmful to repeal it,'' Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., told the Senate Banking Committee on Thursday. "There were some very highly important and constructive improvements in the law."
Federal Reserve Chairman Ben S. Bernanke said the new law, known as Dodd-Frank after its two lead sponsors, came after "a long and thoughtful process." It makes regulators look at the entire financial system for signs of risk and gives the government the tools to shut down large firms in danger of failing without risking economic damage or having to bail them out.
"It was painfully clear in retrospect that the regulatory system existing during the crisis was insufficient," he said.
But nearly all congressional Republicans were strongly opposed to the sweeping overhaul of financial rules, which tightened regulations and added new oversight, including an agency to protect consumers. Much of the financial industry also opposed the law and has been fighting to water down or delay the implementation of hundreds of new rules being written by regulators.
Senate Banking Committee Chairman Tim Johnson (D-S.D.) said delays could leave the economy vulnerable.
"Opponents of financial reform may want to use revisionist history, but Americans have not forgotten that the recession was caused in part by excessive risk taking among some of the largest financial firms," he said. "The effective, timely, and well-coordinated implementation of these reforms is critical to our economic security.”
Republican leaders have supported a full repeal of the law, but that is unlikely given Democratic control of the Senate and strong opposition from President Obama. Instead, opponents have been taking a piecemeal approach.
The House Financial Services Committee, for example, was expected on Thursday to pass legislation watering down the top job at the new Consumer Financial Protection Bureau. Also, nearly all Senate Republicans have vowed to block any nominee to the position unless changes are made.
Bernanke said it was important to fill new and existing positions.
"I hope there will not be unnecessary delays and politically motivated blockages that prevent qualified people from doing their duties," Bernanke said.
Senate Democrats tried again Thursday to push past one obstacle as the committee voted 12-10 along party lines to approve the nomination of Nobel laureate Peter Diamond to the Federal Reserve Board. Diamond was nominated last year.
It was the third time the committee has approved his nomination, which has been blocked from full Senate confirmation by Sen. Richard Shelby (R-Ala.). Shelby voted against the nomination again, and its fate in the full Senate is unclear.
But Shelby, the top Republican on the banking committee, did not address the regulators. He had to leave Thursday's hearing early, along with his other GOP colleagues, to attend a meeting with President Obama.
The only Republican to question the regulators was Sen. Pat Toomey (R-Pa.), who urged them to provide more details about the process of developing rules to determine which large non-bank financial firms would fall under new government oversight and allow at least 60 days for public comment.
Regulators said they were working on additional details and would seek public comment, but wouldn't commit to 60 days.
-- Jim Puzzanghera
Photo: Banking regulators update senators on the financial reform law. From left are Deputy Treasury Secretary Neal Wolin, Federal Reserve Chairman Ben S. Bernanke, Federal Deposit Insurance Corp. Chairwoman Sheila Bair, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler and acting Comptroller of the Currency John Walsh. Credit: Reuters