Both sides inch closer to agreeing on financial reform

April 21, 2010 7:57:39 PM PDT
It looks like President Barack Obama's controversial plan for financial reform is making headway. Republicans had promised to shoot it down, but it now appears congressional leaders are closing in on a deal.

Just a couple of week ago, Democrats and Republicans were yelling at each other, but now there are reports an agreement on financial reform could be announced by the end of the week.

Republicans are taking their first cautious steps in support of the president's financial reform plan.

"We're making real progress and we're more optimistic than we've ever been," says Sen. Richard Shelby, R-Alabama.

Republicans had been in lockstep opposition, but Wednesday Sen. Charles Grassley, R-Iowa, became the first Republican to support part of the plan, voting in committee for a new regulation on derivatives or "bets" on whether an industry will succeed or fail.

One key Republican says the bill could even change the way the Senate operates.

"I think this bill is potentially the beginning of us being able to function in an appropriate way in this body," says Sen. Bob Corker, R-Tennessee.

So, what happened to cause this coming together?

"I think the major driving force in this is the SEC civil action against Goldman Sachs," says ABC7 political analyst Bruce Cain.

The U.S. Securities and Exchange Commission is suing Goldman Sachs for fraud, accusing the company of hoodwinking investors into buying toxic subprime mortgages, while helping hedge fund manager John Paulson lay bets that those toxic securities would fail. John Paulson made $1 billion, while investors lost $1 billion.

"It sort of focuses populist anger on the need for regulation and gives an urgency to passing the financial regulation bill that wasn't there say two weeks ago," says Cain.

Some Republicans wonder about the timing of the lawsuit.

"The events of the past five days have fueled legitimate suspicion," says Congressman Darrell Issa, R-Calif., and eight other Republicans in a letter to the SEC.

However, trying to argue the president is controlling the timing of Securities and Exchange litigation is an uphill fight, particularly in the teeth of public outrage over Wall Street abuses. The bill would increase regulations on financial transactions and create a new consumer protection office.

On Thursday, the president takes his case to Main Street on a tour that will take him to Iowa, Missouri and Illinois.

"I think the president will remind the American people and the Senate what we all have at stake as we move forward," says White House Press Secretary Robert Gibbs.

Goldman Sachs' office in San Francisco declined to comment for this story. Earlier this week, the company issued a statement saying it acted appropriately and will defend itself in court.

The timing of this lawsuit and allegations that have come out, do remind some of the point in the healthcare fight when Anthem Blue Cross announced it wanted to hike premiums in California by 39 percent.

The White House might be asking itself, "Gee, with enemies like this, who needs friends?"


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