WASHINGTON — Sens. Elizabeth Warren, D-Mass., and David Vitter, R-La., the lead sponsors of a bill to place more explicit limits on the Federal Reserve's emergency lending powers, say the bill is getting  quashed by a full-court press from banking interests.

Speaking at an event at the libertarian-leaning Cato Institute on Wednesday, Vitter said that the bill and its companion legislation in the House are being targeted by banks and other financial institutions that see any limits to the Fed's emergency lending authority as a threat to their ability to benefit from central bank intervention in the event of a crisis. That threat is enough to spur the banks to fight the bill tooth and nail, Vitter said, and so far the banks are winning.

"The question is, how big is the public debate and is it getting big enough to counteract the insider special interest game?" Vitter said. "To me that is the political fight that is going on and so far the public debate hasn't been big enough, loud enough to overcome the special interest game."

Warren agreed and called on her fellow lawmakers to take up and pass the legislation. She said the public must put pressure on lawmakers to stand up for their interests, or at least make their position on the bill public.

"The public interest here, there is no army of lobbyists representing them, there is no army of lawyers coming in every day to talk to every Senate staff [member] to make sure their position is well known," Warren said. "The question is, will the insiders control the game — the ones who have got the lobbyists, the ones who have a lot of money on the table but a very small insular group but one that, quite frankly, wants to enhance its profits at the expense of the public — or, will we really be there to represent the people who are affected by this?"

Vitter illustrated his point by saying that legislation he had proposed requiring the Government Accountability Office to study the cost of "too big to fail" was so strongly opposed by the finance industry that it was ultimately tabled, even though it would have had no binding effect.

"The megabank lobbyists came out of the woodwork in enormous full force," Vitter said. "I knew they were there, I certainly understood that they would oppose it. But it stunned me to the extent that they came out in full force about doing a study and putting some numbers on it. We need to overcome that with broad-based public debate."

Dodd-Frank placed restrictions on the Fed's authority to offer emergency loans to distressed financial institutions — specifically, it only allowed the central bank to offer broad-based loans, rather than lending to an individual company, and the company had to be insolvent.

But the Fed interpreted "broad-based" and "insolvent" in very wide terms in their regulations implementing the provision, defining "broad based" as being at least two institutions and insolvent as not having yet declared bankruptcy. The Warren-Vitter bill would require at least five institutions to be offered funds and would require the Fed to examine and certify that recipient institutions are insolvent before using its emergency lending powers.

The bill has powerful enemies besides the banks. Fed Chair Janet Yellen said in her testimony to the House Financial Services Committee in July that the Fed's role as lender of last resort is a "critical responsibility" and that she disagrees with the position that it poses a moral hazard, though she has not addressed the legislation directly. Former Fed Chairman Ben Bernanke, however, has said that the bill is "a mistake" because the Fed's lending powers are so important.

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