Washington: U.S. treasury secretary Timothy Geithner on Sunday expressed confidence that lawmakers will bridge partisan differences on the overhaul of financial regulations and pass a bill that protects taxpayers from financing future bailouts.
“I am very confident that we’re going to have the votes for a strong package of financial reforms that will bring derivative markets out of the dark, help protect the taxpayers from having to fund future bailouts and trying to make sure we’re getting Americans some basic protection against fraud and abuse,” Geithner told NBC’s “Meet the Press.”
Republicans have attacked a bill that was passed by the Senate Banking Committee without their support, saying it would expand the government’s reach too, far into private markets and allow for endless taxpayer bailouts of big banks.
“We want to make sure that we don’t set up a system whereby we empower the government to continue to do what it has been doing — running banks, insurance companies, car companies,” senate republican leader Mitch McConnell said on CNN’s “State of the Union.”
“The American people are saying, we don’t want another bailout, but they also don’t want a kind of perpetual government massive interventions across the board running private businesses,” he added.
Republicans have targeted a Senate bill proposal that would set up a $50 billion bank-financed fund to pay for liquidating distressed financial firms saying it would perpetuate government financial bailouts. The White House is said to not favour the provision and sources said on Friday Democrats are considering dropping it.
Lawmakers are still discussing sticking points in the bill as the Senate prepares to take it up in the next few weeks. The U.S. House of Representatives has passed its version of the legislation.
With control of the Senate and House of Representatives at stake in the November election, Democrats and Republicans are tapping into the anger felt by many Americans against Wall Street firms in the wake of the financial crisis. Reining in Wall Street is seen as a popular move with voters.
Lawmakers want to avoid a repeat of the $700 billion bailout fund that was used to help major financial firms, including AIG, Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley and Goldman Sachs as well as automakers.
Regulators on Friday charged Goldman Sachs with fraud linked to subprime mortgages sparking fears in the broader market of civil lawsuits that could make it more difficult for the financial industry to fight tough reforms.
MAKING A PITCH FOR REFORM
President Barack Obama is expected to travel away from Washington in the next few weeks to discuss the need for Wall Street reform, a White House official said.
Republicans argue the Democratic bill will lead to more taxpayer-funded bailouts and say it establishes new regulatory powers that will stifle small businesses and community banks.
All 41 Republicans in the 100-seat Senate expressed their opposition to the bill in a letter on Friday but said they were willing to work with Democrats on the issue.
In his NBC interview Geithner said overhaul legislation working its way through Congress would force financial institutions, not taxpayers, to pay for their mistakes.
“The banks are going to be on the hook for paying the cost of any future crisis,” Geithner said. “That’s something you’re going to see Democrats and Republicans agree on ‘cause it’s a basic thing of fairness.“
Geithner said lawmakers were close to reaching bipartisan agreement saying that both Republicans and Democrats agree on the need to end to the concept of “too big to fail.”
But the two sides are still “some ways apart” on consumer protections and how to regulate derivatives financial instruments that derive their value from the price of some underlying instrument or event, Geithner said.
Obama said on Friday he would veto any bill that did not impose strong enough controls over markets for derivatives.
Meanwhile, Bill Clinton said in an interview with ABC’s “This Week” that he made a mistake not pushing for more derivatives regulation while he was President.
“The argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them, and they don’t need any extra protection and any extra transparency,” Clinton said.
“The flaw in that argument was that, first of all, sometimes people with a lot of money make stupid decisions and make it without transparency,” he added .