Democrats will bring their financial reform bill to the Senate floor this week, hoping to build the case that the securities fraud charges brought against investment giant Goldman Sachs validate their argument for sweeping new regulations for Wall Street.
To build momentum around the bill, Obama will take the message of the importance of financial reform around the country, much as he did for health care. The president on Thursday will deliver remarks in New York City, where he will call for "swift Senate action."
"The president will also remind Americans what is at stake if we do not move forward with changing the rules of the road as a part of a strong Wall Street reform package," White House Press Secretary Robert Gibbs said in a statement today.
As the White House often points out, when Obama took office in January 2009, he inherited the worst economic crisis in generations, but now a once-dire situation has turned into a potential political advantage for Democrats. From job creation to lower bailout costs to economic growth, Democrats in the White House and on Capitol Hill believe they have all the momentum as the Wall Street reform debate takes center stage in Washington.
"The fact is that Democrats are on the side of Main Street, of trying to make sure that this doesn't happen again," Regan LaChappelle, spokeswoman for Senate majority leader Harry Reid, told ABC News. "I think this is something that the American people want, that Wall Street is regulated, and that we don't end up in the same situation we found ourselves in. ... I think there is momentum to do this, and we plan on getting this done for the American people."
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said today the case against Goldman Sachs will hasten the passage of the financial reform bill in the Senate, and that some of the GOP senators are likely to side with Democrats in the end.
"It reinforces the need for much of what we were doing," Frank said in a CNBC interview.
But so far, all 41 Senate Republicans are unanimous in their opposition. They signed a letter saying the financial reform bill, as it is currently written, needs to be changed before they can support it.
Democrats will need at least one Republican vote to avoid a filibuster. Chairman of the Senate banking committee Chris Dodd today argued that the bill was crafted on a bipartisan basis and that it holds Wall Street accountable, as Republicans had said they wanted.
"This comes right down to this basic question: Whose side are you on?" said Dodd, D-Conn., pointing out that big banks oppose the financial reform bill he has proposed. "If we do nothing, it's the status quo. We're vulnerable once again."
The bill creates a new consumer protection agency with the power to stop abusive practices by the financial industry, including sudden credit card interest rate hikes, hidden bank fees and predatory loans.
The bill also regulates high-risk speculation on derivatives, which some say helped to cause the financial collapse in the first place.
The main point of contention however is that the bill gives the Treasury Department the power to force failing banks into bankruptcy. It establishes a $50 billion fund to pay for shutting down big banks, financed with fees imposed on the banks themselves rather than taxpayers. But Republicans argue that the $50 billion bailout fund will not be enough to cover the costs of saving a failing bank, and that taxpayers would have to foot the bill for costs above $50 billion, a point that Dodd opposed.
"Those words 'bailout' are historic terms here," he said. "Never again will you be bailed out."
Treasury Secretary Timothy Geithner met with with moderate Republicans on Capitol Hill today to rally support but no Republicans are yet on board. Sen. Susan Collins, R-Maine, said she will vote to filibuster the financial reform bill and that she cannot envision any bipartisan proposal for at least three weeks. Collins, a key GOP moderate who authored her own Wall Street regulation proposal last year, referred to the bill Senate Democrats are pushing as deeply partisan.
GOP Leaders Oppose Financial Reform Bill Language
President Obama's economic team is now riding a wave of good news at an opportune time as the Senate takes up the financial reform proposal.
The hugely unpopular Wall Street bailout is now expected to cost less than anticipated. The administration expects to rake in billions of dollars in profit from their investments in banks, including a possible $11 billion haul from the Citigroup bailout. The administration says its stimulus bill has generated more than 2 million jobs. And perhaps most importantly, the administration can also highlight three straight quarters of economic growth and 162,000 jobs created in March, the strongest month of job growth in the last three years.
"Because there are millions of Americans still struggling in these tough economic times, the president will continue to fight day and night for policies that lay the groundwork for businesses to grow, for American families to get back on their feet, and for tough Wall Street reform that will help prevent another crisis," White House spokeswoman Amy Brundage said in an e-mail to ABC News.
Meanwhile, Republicans are painting the financial reform bill as a " backdoor bailout" for Wall Street.
"I think we should get a bill. I think it needs to be done on a bipartisan basis. And we need to get it done as close to the right way as possible. This bill will have a lot more credibility if, unlike health care, which was jammed down everybody's throats on a partisan basis," Senate Minority Leader Sen. Mitch McConnell, R-Ky., said Sunday on CNN's "State of the Union." "This is a big, complicated subject. Another massive bill that we believe in its current form provides an endless taxpayer bailout of Wall Street firms.
Some economists say the plan does not go far enough in regulating high-risk investments, or to hold enough capital on hand.
"The present bill -- the present bill is not a good bill, period. I have reviewed it. We've analyzed it," Sen. Scott Brown, R-Mass, said on CBS's "Face the Nation" Sunday.
But conservative columnist and ABC News contributor George Will predicts there will be plenty of bipartisan support.
"I think, at the end of the day, there's going to be a bill with 70 votes," Will said Sunday on ABC's "This Week."
Democratic leaders also expressed similar optimism today.
"I'm going to work on the assumption that the glass is half full here," Dodd said. "That when we bring this bill up later this week, that we will have the votes across the board, whatever differences may exist in the legislation, to allow us to debate this legislation, consider amendments and move forward."
ABC News' Z. Byron Wolf and Kristina Wong contributed to this report.