WASHINGTON — The architect of sweeping legislation that would revamp financial regulation took the Senate floor on Wednesday to accuse the Senate Republican leader of lying about the bill and being in Wall Street's back pocket.
Senate Banking Committee Chairman Christopher Dodd, D-Ct., delivered a blistering 20-minute speech that included the revelation of a political talking points memo from a Republican strategist that was virtually verbatim to the criticism voiced Tuesday by Senate Minority Leader Mitch McConnell, R-Ky.
McConnell had accused Dodd of drafting partisan legislation, even though the Banking Committee chairman has worked for roughly half a year with key Senate Republicans and incorporated many of their ideas into his bill. McConnell also said the bill continues controversial bank bailouts, but it doesn't.
"It's a naked political strategy," thundered a visibly upset Dodd. He held up a leaked memo attributed to GOP strategist Frank Luntz that advises Republican lawmakers to accuse Dodd and other Democrats of perpetuating bailouts for giant banks. The public disliked the bank bailouts, so framing the Democrats' financial overhaul legislation as a "bailout" could win Republicans votes.
"Nothing could be further from the truth. The bill as drafted ends bailouts," Dodd said, describing how regulators would get new powers to dissolve large financial institutions, even healthy ones if their size is deemed to threaten the broader financial system.
Additionally, the Dodd bill would require large institutions to present a plan for how to liquidate their company if necessary.
Both the Senate bill and one the House of Representatives passed in December also would create a fund that large financial firms would have to pay into to cover the costs to dissolve their foundering brethren. The House fund would be $150 billion; the Senate's, $50 billion.
Dodd said that these measures prove that there are no provisions in the legislation for bank bailouts, as McConnell charged and as Luntz had recommended.
"Under our proposal, they will never happen again," Dodd said. He suggested that the false allegation was a strategy to help Wall Street banks hold onto the status quo. "Wall Street special interests needed a way to defend the broken system."
McConnell and other Republicans insist that the dissolution funds, paid for by fees on banks and not taxpayers, constitute "bailout funds."
"That is precisely the debate that we're having right now," insisted McConnell spokesman Josh Holmes in an e-mail challenging the initial version of this McClatchy story.
Later, Sen. Richard Shelby, R-Ala., the senior Republican on the Banking Committee, said he agreed with McConnell's points but added: "This is a very complicated, complex and far reaching legislation. Right now we're still talking."
Dodd said his negotiations with Shelby will continue in search of bipartisan backing. "The door is still open . . . but my patience is running out," Dodd said.
Tennessee Republican Bob Corker, who was the chief Republican negotiator in recent months, tried to downplay the rift, noting that criticism of the bill is "blown out of proportion."
Corker said that some changes made about 10 days ago on behalf of the Treasury Department and Federal Deposit Insurance Corp. could lead to loopholes that allow failing banks to continue, but Corker acknowledged that the issue is solvable.
"I think we can fix this . . . in about five minutes," Corker said.
Earlier Wednesday President Barack Obama met with lawmakers from both parties at the White House.
To avoid another financial collapse, "he specifically pushed attendees on derivatives and the recent effort by the financial industry to pressure the Senate to weaken oversight" of them, said a statement after the meeting issued by White House Press Secretary Robert Gibbs.
Obama also "reaffirmed his belief that we must end taxpayer bailouts, end 'Too Big To Fail', and that he would not accept a bill that did not pass that test," Gibbs' statement said.
"The president also encouraged attendees to stop the campaign of misinformation being run by financial industry lobbyists and representatives of trade groups."
(David Lightman contributed to this article.)
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