President Barack Obama pledged on Tuesday to pursue major changes in U.S. financial regulation, but warned it will be a heavy lift politically with special interests already offering opposition.
The president is expected to formally unveil a set of proposals for tightening oversight of banks and markets on Wednesday, after six months of debate over strategies and with the economy still hurting from a severe financial crisis.
One key element in the administration's plan will be the creation of an independent Consumer Financial Protection Agency that will write and enforce rules on fair lending and other matters, according to a document obtained by Reuters that was later confirmed by an administration official.
To prevent future crises, the administration wants to give the Federal Reserve new powers to police systemic risk in the economy, in conjunction with a council of regulators.
They will also propose empowering the government to seize and unwind large, troubled companies; boosting bank capital and liquidity standards; and reining in markets for securitized debt and over-the-counter derivatives.
There is going to be streamlining, consolidation ... so that you don't find people falling through the gaps, the president told reporters.
Whether it's on the consumer protection side, the investor protection side, the systemic risks ... It's going to be a much more effectively integrated system than previously, he said.
Months of debate lie ahead. Congress has set more than a dozen hearings on financial reform between now and mid-July.
We are going to put forward a very strong set of regulatory measures ... We expect that Congress will work swiftly to get these laws in place, Obama said.
But it is going to be as usual, a heavy lift ... You'll hear a lot of chatter about 'We don't need more regulation' and 'government needs to get off our backs,' he added.
There is a short memory unfortunately and I think that's what some of the special interests and lobbyists are going to be counting on, that somehow we've forgotten the disaster that arose out of their reckless behavior. And I'm going to keep on reminding them so we make sure that we get something in place that prevents this kind of situation from happening again.
HOYER ON TIMING
U.S. House of Representatives Democratic Leader Steny Hoyer said on Tuesday that the House will deal with financial regulation reform in late July or soon after Congress's August recess. The outlook in the slower-moving Senate was unclear.
The president's remarks came shortly after the U.S. Chamber of Commerce, the nation's largest business lobbying group, told reporters it opposes parts of the Obama plan.
The chamber said it opposes new government powers to seize and unwind large, troubled firms; creating a financial products safety watchdog; and a regulatory proposal to give shareholders more say in nominating directors to public companies.
While the shape of the Obama plan has been known for some weeks, sources familiar with discussions at the U.S. Treasury Department said on Tuesday one potential idea will be left out for now -- federal insurance regulation.
Representative Barney Frank, chairman of the House Financial Services Committee, said on Tuesday that the administration is not ready to weigh in on an 'optional federal charter' for insurers, according to sources who heard him speak at a fund-raiser hosted by an insurance industry group.
When the reform plans are unveiled on Wednesday, officials are expected to fault the fragmented nature of insurance regulation, which is now handled by state and territorial governments, and there may be a proposal to form a federal clearinghouse to gather information about the sector.
Only ostriches can now deny the need for establishing a federal insurance resource center and a basic federal insurance regulatory structure, Representative Paul Kanjorski said at a Tuesday hearing to discuss reform of the insurance industry.
(Additional reporting by Corbett Daly, Karey Wutkowski, Patrick Rucker, Thomas Ferraro and Rachelle Younglai, Editing by Chizu Nomiyama)