POLITICS
06/07/2010 05:12 am ET Updated May 25, 2011

White House Says Financial Regulation Reform By Memorial Day Is Possible, Offers Specifics

Obama administration officials on Wednesday expressed optimism about the passage of financial regulatory reform legislation and made explicit recommendations to resolve those sticking points that remain to be debated.

In a briefing with reporters on Monday, three high-ranking White House officials acknowledged the potential for a fairly quick time frame by which legislation could be passed through Congress.

"We think this is picking up momentum," said Neal Wolin, Deputy Secretary of the Treasury. "If you have noticed in the last few weeks, you have seen Republicans in the Senate acknowledging that legislation is likely to happen, to get enacted this year. I think there is... a clear understanding of the importance of enacting legislation sooner than later."

As it stands now, Wolin predicted that the Senate as a whole will start considering the legislation passed through the Senate Banking Committee "sometime in April" after which it will have to be merged with the House's variation. Provided there are no setbacks, the president could sign legislation into law by Memorial Day.

"The timing game we can play all day long," said Diana Farrell, Deputy Director of the National Economic Council. "Is [Memorial Day] feasible? It's feasible."

Timelines, of course, are notoriously difficult to predict. And if the health care reform process is any template, it's safe to bet on congressional lethargy. While Republican senators have, over the past few weeks, warmed up to the idea of supporting financial reform legislation they remain opposed to various components of the president's proposal: namely the more transparent trading of derivatives and the strong independent consumer protection agency.

Democrats themselves have to work through several areas of disagreement when it comes to Dodd's bill and that which has already passed by the House. On Wednesday, the trio of White House officials (which included Michael Barr, Assistant Secretary of the Treasury for Financial Institutions) suggested some specifics about how they would like to see those differences resolved.

The White House is taking a firm stand to make sure that the proposed consumer financial agency has authority over a wide array of industries, emphasizing that loopholes aren't welcome and hinting that they'd like to change the House bill's language which exempts auto dealers.

"I think the president made clear we are going to fight and he is absolutely opposed to efforts to weaken it, and a carve-out for auto dealers would be a paradigmatic example of such a weakening," said Wolin.

On another contentious issue -- the debt-to-equity ratio requirements for big banks -- the administration sided, as they have in the past, with the Senate's version of reform; expressing philosophical opposition to forcing institutions to set aside a fixed amount of capital (as the House bill does).

"As is the case now and is the case nationally it is important to make sure you don't put into law -- which is very hard to change -- ratio and numbers and quantitative limits that will change over time as the markets change, as our understanding of risk changes, as the business models and institutions change," said Wolin. "We want to make sure we are talking about strength in terms of capital standards... But at the end of the day it is important that the regulators have basic flexibility to be able to adjust the detail of the ratio and number and so forth as the world turns."

It remains to be seen how managing these debates will play out during conference committee -- should the bill get there. But the White House trio sounded fairly confident that negotiations will proceed smoothly. And they relayed that the president and Treasury Secretary Tim Geithner will play an increasingly more active role in the process.

"I think both of them have been out a lot, they will continue to be out a lot and, as this gets further along in the process, the pace of that activity will naturally pick up," said Wolin.