President Obama to Fight for Regulation of Derivatives — Undoing What Economic Adviser Summers Pushed in 90s

By Jonathan Blakely

Apr 14, 2010 10:00am

A senior Obama administration official says that at today's meeting with the Democratic and Republican leaders of the House and Senate, focused on financial regulatory reform, the president "will make the fight for strong oversight of derivatives– the same financial products that led to near collapse of AIG and a part of Wall Street reform many Republicans have been fighting to weaken–a central part of his argument during the bipartisan meeting."
 
Republicans have indeed been fighting the change, but it's worth pointing out that the notion of regulating derivatives was pushed long before the financial crisis — and was fought tooth and nail in the late 1990s by President Obama's current director of the National Economic Council, Larry Summers, who was then deputy Secretary of the Treasury Department under President Clinton.
 
As meticulously and grippingly documented by PBS's Frontline, in the late 90s, Summers, then-Treasury Secretary Robert Rubin and then-Federal Reserve chair Alan Greenspan pushed back against the efforts of Brooksley Born, then the chair of the Commodities Futures Trading Commission, to regulate derivatives.
 
In any case, President Obama will push for the shift today at a White House meeting with House Speaker Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., Senate Minority Leader Mitch McConnell, R-Kentucky, House Majority Leader Steny Hoyer, D-Maryland, and House Minority Leader John Boehner, R-Ohio.
 
“Enacting Wall Street reform has been a goal of President Obama's since well before taking office, and he will discuss the choice he sees in this debate –  whether to stand with the American people or stand on the side of the status quo,” a White House official said, “We believe momentum is on the side of greater accountability for Wall Street and strong protections for consumers and we hope Republicans in Congress will join us in a constructive conversation  about how to move a strong bill forward."
 
This morning, Bloomberg News' Julianna Goldman and Alison Vekshin reported that Summers and White House senior adviser David Axelrod on April 6 met with Brian Moynihan, the CEO of Bank of America Corp.; Lloyd Blankfein, CEO of Goldman Sachs Group Inc.; and  Jamin Dimon, CEO of JPMorgan Chase & Co.; and roughly a dozen other executives from top financial institutions to urge them to stop lobbying against the financial regulatory reform bill Democrats are pushing on the Hill.
 
"It is essential that we pass strong financial reform to prevent future crises," said White House deputy communications director Jen Psaki of the meeting. "We are open to ideas from any quarter that strengthen the bill, but the President has been absolutely clear that we will not allow this legislation to be weakened to protect the interests of any firm."
 
In March, the Senate Banking Committee approved on a party line vote a financial regulatory reform bill from chairman Sen. Chris Dodd, D-Conn.
 
-jpt

You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus