WASHINGTON — A key piece of President Barack Obama's plan to prevent another economic meltdown already has slowed in Congress, and Democrats acknowledged Thursday that the task of approving the proposal may be tougher than initially thought.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has delayed plans to take up during the first week of May a bill that would enable the government to wind down failing financial institutions like insurance giant American International Group.
The creation of a "resolution authority" was considered a relatively easy first step in the effort to revamp government oversight of the financial system.
Frank spokesman Steve Adamske said the bill would come up at a later date as part of a broader bill that would name a federal regulator to monitor risk across the financial system.
"We're not going to be able to move as quickly as we thought," said Adamske. "It doesn't mean it won't get done."
Obama and congressional Democrats have vowed to overhaul financial regulations by the end of the year. Had regulations been tighter in recent years, they say, firms would not have taken many of the risky bets that ultimately put them in danger of collapsing and in need of a $700 billion government bailout.
Sen. Chris Dodd, D-Conn., and chairman of the Banking Committee, said in an interview Thursday that he remains committed to tightening industry rules this year. But he also acknowledged that the work load is daunting for a Congress still trying to get its arms around the financial crisis.
On Wednesday, the Senate voted to create both a congressional panel and a $5 million independent commission to investigate the economic meltdown in the next 18 months.
Lawmakers have been wrangling with the question of which government organization — namely the Federal Reserve, Federal Deposit Insurance Corp. or Treasury Department — should be able to wind down troubled institutions. The FDIC already has the power to place banks into receivership, but does not have the same authority with insurance companies like AIG, holding companies and other institutions whose failure could threaten the economy.
Frank said in an interview with the Wall Street Journal this week that the issue had proved more complicated than originally thought. Congress needs to name a "systemic risk" regulator before it can determine which companies must be dismantled, Frank said.
But that issue isn't an easy one either. Republicans and some experts oppose taping the Federal Reserve to monitor systemwide risk because of its preoccupation with setting the nation's monetary policy. Some lawmakers also blame it for failing to prevent the current economic crisis.
Adamske confirmed that the two issues — naming a resolution authority and a systemic risk regulator — would likely be rolled into one bill. He said timing of that legislation remains uncertain.