President Barack Obama, eager to harness and redirect voter anger over bank bailouts, is ramping up his war on Wall Street.
Building on his own proposals and the work of the House, the president wants new federal government powers to limit the size and complexity of large financial institutions and to limit their ability to engage in high-risk trades.
Obama will make the announcement Thursday, a senior administration official said, in a bipartisan display aimed at capitalizing on the one issue in his agenda still standing after a devastating Democratic electoral loss in Massachusetts.
The president will be flanked by former Federal Reserve Chairman Paul Volcker and William Donaldson, appointed by President George W. Bush as head of the Securities and Exchange Commission. Both men have advocated tighter banking restrictions. Volcker heads the President's Economic Recovery Advisory Board.
Obama's announcement comes as the White House renewed Obama's demand that any overhaul of banking regulations contain an independent consumer financial protection agency. The proposed agency is one of the major sticking points in the Senate and the central focus of negotiations between Democrats and Republicans on the Senate Banking Committee.
"The president is not going to compromise because lobbyists tell somebody that we shouldn't have an agency that protects consumers," White House spokesman Robert Gibbs said. "That's something the president's not willing to give up."
The tougher measures to be announced Thursday aim to limit speculation by commercial banks and to keep financial institutions from becoming so big that they pose a risk to the overall economic system.
In focusing attention on Wall Street, however, the administration is also seeking to halt a wave of public anxiety that is benefiting Republicans and undermining Obama's agenda.
Obama last year proposed a series of measures to tighten the reins on financial institutions in hopes of preventing a recurrence of the crisis that struck both Wall Street and Washington in the fall of 2008. The House passed a bill last month.
But his announcement Thursday will broaden those measures, particularly by endorsing Volcker's proposal to restrict proprietary trading by commercial banks. Such a limit would separate commercial banks from investment banks, a line that was blurred a decade ago by the repeal of the Depression-era Glass-Steagall Act. That restriction would affect some of the nation's biggest banks, including banking giants Bank of America Corp., Goldman Sachs and Citigroup Inc.
The senior administration official, speaking on the condition of anonymity because the plan had not yet been made public, said Obama has been planning for months to toughen proposed legislation to reduce risk-taking and limit the size and scope of financial institutions.
"The White House will work closely with the House and Senate to work this into legislation moving on the hill," the official said.
News of the announcement came shortly after Treasury Secretary Timothy Geithner had a private dinner Wednesday night with chief executives from some of the top Wall Street banks.
There was also a new urgency in the Senate to move on the legislation — an attempt to respond to voter anger at Wall Street and bank bailouts that helped propel Republican Scott Brown to victory in a contest for the seat formerly held by the late Democratic Sen. Edward Kennedy.
Brown's victory gave Republicans 41 votes in the Senate, enough to mount successful filibusters and prevent Democratic legislation on health care or climate change from getting final votes.
But financial regulations could survive.
"I don't want to see us have to go through what we've been through here where we've been relying on one party to get something," Senate Banking Committee Chairman Christopher Dodd, D-Conn., said Wednesday.
Moreover, Geithner met with Senate Republican leader Mitch McConnell of Kentucky on Tuesday. Administration officials now believe that while Republicans may seek to block other aspects of the president's agenda, McConnell is considering making financial regulations an exception.
To that end, Dodd has been negotiating with the Banking Committee's top Republican, Sen. Richard Shelby of Alabama.
"We're talking, and obviously my hope is that in the next few weeks we'll have a markup and move forward," Dodd added, referring to official committee action on the bill.
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