The Obama administration told Senate Democrats Friday to drop a proposed $50 billion fund designed to finance the liquidation of a big financial institution facing collapse, a victory for Senate Republicans who opposed government-supervised and government-funded corporate bailouts.
"The fund was not in our original proposal we announced almost a year ago and we don't feel it is an essential part of final legislation," a senior administration source told Fox. "The President will only sign a bill if it passes the test of putting an end to bailouts."
President Obama also issued a veto threat on regulatory reform, saying he will reject legislation that "does not bring the derivatives market under control in some sort of regulatory framework."The Senate Republican leader, Mitch McConnell of Kentucky, offered mute praise for the administration's formal dismissal of a so-called bailout fund.
"I appreciate the Obama administration's recognition of the need to substantively improve this bill," McConnell said from Louisville. "And I hope we can work with them to close the remaining bailout loopholes that put American taxpayers on the hook for financial institutions that become 'too big to fail.'"
The administration has never been a fan of the bailout reserve fund, a mechanism in both the House-passed bill and legislation passed out of the Senate Banking Committee.