NASDAQ: Obama's Bank Proposals Not Seen Slowing US Financial Overhaul

WASHINGTON -(Dow Jones)- New Obama administration proposals to tax some banks and limit their size and risk shouldn’t complicate efforts to overhaul U.S. financial regulation, Sen. Jon Tester (D., Mont.), said in a midday speech Wednesday.

“I do not see a proposal by the administration slowing us down,” Tester said in response to questions after a midday speech to the Women in Housing and Finance?group.

President Barack Obama last week unveiled plans to limit banks from growing too big or taking on excessive risks through bank-owned hedge funds or proprietary?trading, an idea that Tester said deserves scrutiny.

“Let’s take all options and put them on the table,” he said.

Tester, a Senate Banking Committee member, endorsed changes to end the notion that some banks are too big or too important to be allowed to fail. He said exploring the president’s approach may require the banking committee to hold a few more hearings, but said “there’s plenty of time to do that” and pass legislation in a timely way.

Tester is less enthusiastic about the administration’s plan to impose a new tax on financial firms that received government aid through the Troubled Asset Relief Program, or TARP.

“I’m very concerned that the tax could be passed on to customers,” said Tester, who called for the idea to get close examination by lawmakers.

Bankers have objected to the proposed 15-basis-point tax levy on liabilities at banks that received TARP funds, viewing it as an unfair penalty, particularly for firms that already have repaid TARP loans.

Tester expressed optimism about talks on U.S. financial reform between Senate Banking Committee Chairman Christopher Dodd (D., Conn.), and Sen. Richard Shelby (R., Al.), the senior Republican on the committee, and said he’s hopeful they will yield legislation that is supported by members of both parties.

For his part, Tester called for changes to prevent a repeat of the 2008 global financial meltdown, saying “I believe that we need more than a few technical tweaks, we do need some structural changes.”

More oversight of complex derivatives transactions is needed, as is closer supervision of credit-rating agencies and the largest and riskiest financial firms, according to Tester. He said hedge-fund managers should be required to register with the Securities and Exchange Commission and report on their activity, and that lenders who package loans into securities should have “some skin in the game” so that they don’t pass along all of the risk of a loan default to investors.

Proposals to create a new consumer financial protection agency aren’t high on Tester’s list of desired changes, though.

“Fundamentally, I’m not crazy about building another agency,” he said, but added that the idea “wouldn’t be a deal-killer on my part” and indicated that Senate lawmakers are debating whether the consumer-protection function might be folded into an existing agency, rather than assigned to a newly created one.

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