WASHINGTON — The Obama administration's 2011 budget offered few new details on how to build momentum for legislation that would rework the financial system, but predicted that regulatory reform would finally pass this year.
The budget document largely summed up the plan it released last summer, saying it wants to end "too big to fail" institutions and prevent future government bailouts. Despite persistent political opposition to granting the Federal Reserve Board any new powers, the budget reiterates plans to allow it to regulate large, interconnected firms deemed systemically significant. The budget also summarizes the administration’s proposal for consolidating existing consumer protection authorities under a consumer financial protection agency for banks and non banks to better protect consumers.
Both provisions were part of a reform bill passed by the House in December, but are unlikely to survive in the Senate.
At least one analyst said the vagueness in the budget proposal allows Senate Banking Committee Chairman Chris Dodd more leeway to deal with his colleagues to create a bipartisan bill.
"The administration broke little new ground here, which in our view leaves Senate Banking Chairman Chris Dodd wide latitude to work out a deal," wrote Jaret Seiberg, an analyst with Washington Research Group, a division of Concept Capital, in a note to investors.
The budget also highlights plans to "shine a light on dark pools of capital and derivatives markets by expanding the authority of the Securities and Exchange Commission and the Commodity Futures Trading Commission respectively to register and regulate hedge funds and to require central clearing for over-the-counter derivatives."
It reflects the call to consolidate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and beef up insurance oversight by establishing a new Office of National Insurance within the Treasury.