WASHINGTON opened talks on a wide-sweeping overhaul of Wall Street yesterday after Republican politicians abandoned their blockade of a Senate debate.
In the coming days, Democrats and their opponents will thrash out the terms of what promises to be a highly controversial finance reform bill.
The legislation could see derivatives forced onto regulated exchanges, investment banks forced to split off their proprietary trading desks and hedge funds required to register with the Securities and Exchange Commission. Democrat Christopher Dodd, leading the bill, also wants to set up a nine-member Financial Services Oversight Council and a powerful consumer rights agency.
President Barack Obama welcomed the progress towards political agreement. He said: “This shouldn’t have to be a partisan issue. Republicans, Democrats, everyone was hurt by the crisis on Wall Street.”
Republicans, led by Mitch McConnell, dropped their opposition to discussions after Democrats relented and scrapped the idea of a $50bn (£32.6bn) bailout fund paid for by the banks.
But beneath the newly bipartisan rhetoric put out by both sides, gaping disagreements lie ahead. Republicans particularly object to the establishment of a consumer protection body.
Top Republican Richard Shelby said: “This massive new bureaucracy would have unchecked authority to regulate whatever it wants, whenever it wants, however it wants.”
He added that a crackdown on derivatives could have “far-reaching and devastating effect on business and our economy”.
The legislative wrestling comes at a sensitive time. In the background is the SEC’s fraud charge against Goldman Sachs.