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Senate Finance Committee passes expansion of Fed powers

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Fresh from the landmark victory passing health care reform, President Barack Obama’s administration set its sights Monday on sweeping reforms of Wall Street’s “too-big-to-fail” banks.

Treasury Secretary Timothy Geithner urged lawmakers to engage in the “just war” of reforming the banking sector, as a key Senate committee voted to reform the same banks that pushed the global economy to the verge of collapse.

Geithner told Washington-based think tank the American Enterprise Institute that “financial reform is not a war of choice; it is a war of necessity” as the reforms cleared the Senate banking committee by a 13-10 vote.

The banking committee’s chairman and author of the package, Senator Christopher Dodd (D-CT), vowed the bill — which comes in the wake of a massive financial meltdown — would become law this year.

The bill would strengthen the Federal Reserve’s regulatory powers over the nation’s most massive, “Too Big To Fail” financial institutions, dramatically expanding the central bank’s influence as a whole.

Dodd is not running for reelection.

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Federal Reserve Chairman Ben Bernanke has disclosed in public that with the bank’s expanded framework, it assumes the coming elimination of “minimum reserve requirements” for U.S. banks.

Unhinging these institutions from even basic deposit holdings standards would essentially remake how most institutions do business by eliminating what’s known as “fractional reserve banking.”

Such a system is described by Investopedia as “a banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system.”

Without the requirements, banks need not keep even a fraction of their assets on hand to back up depositors’ wealth. Only a few other nations have eliminated reserve requirements, including Mexico, Canada, Australia and the United Kingdom. America’s main global economic rival, China, has repeatedly increased reserve requirements for its’ state-owned banks since the U.S. financial system began exhibiting such marked instability.

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Sen. Dodd’s finance reform bill does not include a popular House proposal to audit the Federal Reserve, first sponsored by Rep. Ron Paul (R-TX) and ultimately co-sponsored by a bipartisan majority of his peers in Congress.

Geithner said that lawmakers’ ability to pass the measures, which would also create a powerful consumer financial protection agency, would be a “test of our capacity as a nation to deal with complex and consequential problems.

“If we fail to act, America will lose this opportunity to set the global agenda,” he warned.

The bill enjoys President Obama’s full support.

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“I urge those in the Senate who support these reforms to remain strong, to resist the pressure from those who would preserve the status quo, to stand up for their constituents and our country,” he said in his weekly address on Saturday.

“And I promise to use every tool at my disposal to see these reforms enacted: to ensure that the bill I sign into law reflects not the special interests of Wall Street, but the best interests of the American people.”

In an ABC World News poll released on Monday, 77 percent of Americans said the financial industry had not done enough to atone for its role in the economic crisis.

More than 80 percent of the 1,005 adults polled said banks and credit card companies should cut interest rates and simplify paperwork.

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Although Dodd’s proposals have yet to get bipartisan backing because long-running talks with his Republican interlocutor Bob Corker collapsed, there are still high hopes a deal can be done with some Republican support.

But with Democrats expected to paint Republican opposition to health care reforms as pro-industry, Republicans may be reluctant to encourage that narrative by casting their lot with despised bankers, according to Douglas Elliot of the Brookings Institution, a liberal-leaning think thank.

“The politics are very different than for health care reform. The public is demanding action, although the area is too technical for them to know exactly what they want,” he said.

“It is not clear that there are 41 senators who would be willing to stand up and filibuster a bill when that action would be portrayed as siding with the bankers,” said Elliot.

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The package’s highlights include the creation of a powerful committee with the power to break up “too-big-to-fail” banks and other financial institutions.

The bill would also clamp down on hedge funds and other risky investment instruments accused of fueling the crisis, and give shareholders a say on big executive bonuses.

They would also limit the Federal Reserve’s oversight role over state-chartered banks.

It could see the Fed’s purview reduced from around 6,000 banks today to as few as 40 banks under the new rules.

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With AFP.

Stephen C. Webster contributed to this report.

Report typos and corrections to [email protected].
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‘We have been under siege’: Trump falsely claims he has been ‘violently’ attacked by his critics

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President Donald Trump claimed to be the victim of "violence" during his official campaign kickoff in Orlando, Florida.

"Many times I said we would drain the swamp and that’s exactly what we are doing right now. We are draining the swamp," Trump claimed, despite having the most scandal-plagued administration in American history.

"And that is why the swamp is fighting back so viciously and violently," Trump argued.

"For the last two and a half years we have been under siege and with the Mueller report we want and now they want a do-over. They want a do-over," he repeated.

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‘He wants the spotlight back’: CNN commentator says Trump is jealous of all the attention Democrats are getting

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On Tuesday, President Donald Trump held a rally in Orlando, Florida to formally kick off his re-election campaign for 2020.

And as CNN's Gloria Borger explained to John Berman, Trump desperately needed this event — because he was jealous of how much coverage the Democratic presidential candidates are getting.

"One source told CNN campaign officials are hoping this event will satisfy the president's thirst for the spotlight and reset the campaign's efforts," said Berman. "This is the 60th campaign rally for the president. So is there any reason to think that this event could move the needle?"

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Sarah Huckabee Sanders lied ‘proudly and with impunity’ because she was raised to be ‘impervious to reason’: WH reporter

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Outgoing White House press secretary Sarah Huckabee Sanders was blasted by a White House correspondent for her brazen lying from the White House podium.

"Sarah Sanders is a true believer. Conditioned by an upbringing rooted in Christian rhetoric that's impervious to reason, she views the world through a lens in which everything exists in absolutes," Playboy magazine White House correspondent Brian Karem wrote.

Her father, Mike Huckabee, is an Evangelical pastor who served as the Republican governor of Arkansas prior to unsuccessful presidential bids.

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