WASHINGTON — Sitting at a desk in a Washington auditorium packed with supporters, President Barack Obama on Wednesday signed into law the most comprehensive set of banking regulations enacted since the Great Depression.
The new law includes provisions written by Arkansas’ Sen. Blanche Lincoln, a Democrat who is in a hotly contested race for re-election.
“Unless your business model depends on cutting corners and bilking your customers, you’ve got nothing to fear from reform,” Obama said, adding that the bill “ provides certainty to everybody, from bankers to farmers to business owners to consumers.”
“Because of this law,” he told the crowd, “the American people will never again beasked to foot the bill for Wall Street’s mistakes.”
Crafted in response to the 2008 financial meltdown that led to a $700 billion bank bailout, the new law creates a federal Consumer Financial Protection Bureau, designed to look out for the interests of customers using credit cards or signing mortgages. It creates a federal panel that is supposed to look out for problems within individual banks that have the potential of spreading throughout the financial sector. And, in an effort to avoid future taxpayer bailouts to keep banks afloat, the law creates a fund to pay for the closure of distressed banks.
After speaking for a little more than 10 minutes. Obama walked from his lectern to a small wooden desk.
He sat down and signed his name on the document, using 11 blue pens lined up on the table.
“It’s done,” he said, turning to shake hands with Treasury Secretary Timothy Geithner. Ten lawmakers, including Senate Majority Leader Harry Reid, D-Nev., and Speaker of the House Nancy Pelosi, D-Calif., huddled around to celebrate.
Obama singled Lincoln out of the group and walked over to give her a hug.
“We couldn’t have done it without Blanche Lincoln,” he said, turning to the crowd, which had broken out into cheers.
Typically, bill-signing ceremonies take place at the White House. Instead, Wednesday’s took place at the Ronald Reagan Building and International Trade Center, a federal building complex a few blocks away. The auditorium was filled with the national press corps; House and Senate members - all Democrats, with the exception of freshman Rep. Joseph Cao of Louisiana, a Republican who voted for the bill; administration officials, including White House Chief of Staff Rahm Emanuel and Paul Volcker, chairman of Obama’s Economic Recovery Board; and Ben Bernanke, chairman of the Federal Reserve.
Lincoln wrote a section of the law that would regulate trading in derivatives - financial contracts in which traders place bets on the future price of an underlying asset, such as a stock index, a currency or a commodity.
Among other things, Lincoln successfully pushed for derivatives to be traded on an open exchange with real-time price reporting.
“You’re going to see the positive aspect of what consistency and bringing stability into the marketplace for investors and consumers is going to mean,” Lincoln said after the bill was signed into law. “It’s going to be a real structural part of putting our economy back on track.”
Her challenger in the November election, Republican Rep. John Boozman, disagreed.
He said the new regulations would dry up the availability of credit.
“In a shaky economy, this will actually make the economy shakier and cost jobs,” he said.
Articles this month in The Washington Post and Politico, a political-news website, suggest the financial-regulation legislation has sparked an anti-Democratic backlash among Wall Street donors.
The Post story says New York political donations to two key Democratic congressional campaign committees have dropped 65 percent since 2008 and that “a revolt among big donors on Wall Street is hurting fundraising.”
Lincoln, whose campaign as of June 30 had $1.88 million cash on hand, compared with Boozman’s $483,923, said campaign fundraising wasn’t a concern.
“My responsibility was to deal with a $600 trillion marketplace that was completely unregulated,” she said. “That’s what people will see. In terms of elections, people want to see you doing your job.”
Since her last election in 2004, securities and investment houses have been Lincoln’s second-largest groupof donors, behind law firms and lawyers. Securities firms, or people employed by them, chipped in a total of $511,482 as of May 19, according to the Center for Responsive Politics, a Washington group that tracks money in politics.
Two of her five largest single donors are financial firms: JPMorgan Chase, and Stephens Inc. of Little Rock.
A JPMorgan spokesman did not return calls.
Frank Thomas, a spokesman for Stephens, said the company’s political action committee had donated the maximum limit of $5,000 to both Lincoln and Boozman.
He said the new law would not have a large impact on the company’s operations, but said that it would have an adverse impact on other financial institutions. Nonetheless, Chief Executive Officer Warren Stephens “will not change his personal support of Blanche Lincoln,” Thomas said.
During the same time frame, Boozman - whose largest group of donors are retirees - received $42,500 from investment companies. In addition to Stephens, Arvest Bank is among Boozman’s top five contributors, helping make the commercial banking sector among his top donors.
Asked whether Lincoln would score points by taking a populist stance against Wall Street, Boozman suggested voters talk with their local banker. “They’ll find that community bankers are very concerned,” about the new law, he said.
Two polls show Lincoln far behind Boozman.
One, a Talk Business Poll conducted by Zata 3, a Washington polling firm, surveyed 793 likely Arkansas voters July 17. The results showed Boozman with 57 percent, compared with Lincoln’s 32 percent, with a margin of error of 3.7 percentage points.
In a poll conducted by the Benenson Strategy Group, a Democratic polling firm in Washington providing services for Lincoln, Boozman notched 45 percent compared with Lincoln’s 36 percent. The poll was conducted between June 22-24, had 700 responses and a 3.7 percentage-point margin of error.
“Blanche Lincoln’s problem is bigger than one piece of legislation,” said Nathan Gonzales, political editor of the “Rothenberg Political Report,” a Washington-based political newsletter.
He said Democrats face a public that is frustrated with government.
“When government passes a bill, it’s not met with a ticker-tape parade. People are skeptical of things coming out of Washington.”
Front Section, Pages 1 on 07/22/2010