Following a stinging letter sent on Tuesday by Senate Majority Leader Harry Reid (D-NV) and Senate Banking Committee Chairman Christopher Dodd (D-CT) claiming that “Senate Republican leadership seems more interested in mischaracterizing the legislation and protecting Wall Street,” Senator Reid yesterday filed for a cloture vote late Monday afternoon on the financial regulatory reform bill, the “Restoring American Financial Stability Act.” The bill that is the subject of the cloture motion is the version approved by the Senate Banking Committee, but it is expected to be amended to include the provisions of the derivatives bill approved by the Senate Agriculture Committee on Wednesday, as well as any compromises resulting from last-minute negotiations with Senate Republicans. President Obama also weighed into the fray during his speech yesterday at Cooper Union, New York, echoing remarks he made in his weekly address last week.

In his speech yesterday, the President applauded the House of Representatives for passing and the Senate for working through its version of financial reforms. He alluded to Republican criticisms when he remarked, “[It is] not legitimate to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed.” He continued by suggesting that Republicans were caving to lobbyists and described “battalions of financial industry lobbyists descending on Capitol Hill, firms spending millions to influence the outcome of this debate.”

Outlining the bill, President Obama focused on four key areas of reform necessary to effectively protect the American taxpayer, the financial system and the broader economy from another economic crisis:

  • Process for orderly liquidations. Using FDIC bank receiverships as a model, the bill would create an analogous process for liquidating the largest and most interconnected non-bank financial institutions.
  • Transparency. The bill would enact the “Volcker Rule,” which would limit the size of banks and the kinds of risks they can take. In addition, the bill would require standardized derivatives to be traded openly, “in the full view of businesses, investors, and those charged with oversight,” to “respect legitimate activities but prevent reckless risk-taking.”
  • Consumer protections. Additional “strong consumer financial protections” are necessary, according to President Obama, because Americans were “duped ... by deceptive terms and conditions, buried deep in the fine print.”
  • “Say on Pay.” President Obama explained that the bill would give shareholders a “voice with respect to the salaries and bonuses awarded to top executives” and giving the Securities and Exchange Commission greater oversight over corporate elections.

President Obama stated that the purpose of financial industry regulatory reforms is to “ensure that it is more profitable to play by the rules than to game the system” and he urged listeners to join in and to support the reforms to protect the financial industry and to protect the country.