NYT: Senate Liberals Push for Strict Financial Rules

Senate Liberals Push for Strict Financial Rules
May 6, 2010, 1:15 AM

Liberal Democrats in the Senate, emboldened by a wave of populism, are trying to make financial regulatory legislation far tougher on Wall Street, potentially restricting or breaking up the biggest banks and financial companies, David M. Herszenhorn reports in The New York Times.

Normally such efforts might attract little concern among Senate leaders or the White House. But the confluence of a high-stakes election year and a pervasive anti-Wall Street sentiment after the recession has given liberals unusual muscle in the debate. It has also raised the prospect that they could succeed in reshaping the bill.

The liberal amendment that could be hardest to defeat — and is among the most deeply dreaded by Wall Street — also has some of the purest populist appeal: a proposal by Senator Sherrod Brown of Ohio and Senator Ted Kaufman of Delaware to break up the nation’s biggest banks by imposing caps on the deposits they can hold and limits on other liabilities.

“Look at what we did to AT&T, look at Standard Oil, basically what you do is you just split it apart,” Mr. Kaufman said in an interview. “If we don’t do that, we have got too big to fail, because when you look at these big complex entities, you cannot resolve them in a major financial crisis.”

Already, antibank rhetoric dominates the debate, which began in earnest this week. Odd as it might seem, liberal Democrats are aligned with conservative Republicans on some issues, further lifting the chances of amendments like one by Senator Bernard Sanders, independent of Vermont, to audit the Federal Reserve.

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