White House will not back down from financial reforms

WASHINGTON (Reuters) - The Obama administration vowed on Monday to push for tougher financial regulation reform, with legislation possibly headed for the Senate floor as soon as next week.

Invoking the 2007-2009 financial crisis in an appeal for action, Deputy Treasury Secretary Neal Wolin said: "We will fight hard against any effort to weaken that legislation, and we will work to strengthen it further where we can."

At a conference held by the Council of Institutional Investors, Wolin said, "We cannot afford to let the memory of the crisis fade without taking action."

The Senate Banking Committee approved wide-ranging Democratic legislation last month that proposes new rules for derivatives, consumer financial products and a way to ensure that no financial firm is 'too big to fail.' The measure got no votes of support from Republicans on the committee.

As the bill moves forward, Democrats are working to win enough Republican support to ensure full Senate passage, betting that public anger over Wall Street's meltdown and subsequent taxpayer bailouts will win over some Republicans.

That political calculation, based on the approach of November's congressional elections, is not lost on the Obama administration and top federal regulators.

President Barack Obama will hold a meeting with congressional Republicans and Democrats on Wednesday to discuss financial reforms. He has moved the issue to the top of his priority list since winning passage of healthcare reform.

WORLD EFFORTS

G20 leaders and the International Monetary Fund urged governments last month to redouble efforts in tightening up financial rules as some countries lag in curbing bank pay.

The G20's steering countries said in a letter to all group members that governments must recommit and deliver on reforms they agreed to at a summit on the financial crisis in Pittsburgh last September.

Obama first proposed measures to tighten financial oversight in mid-2009. The House of Representatives approved a bill in December. But the Senate has yet to act, more than two years since the meltdown of former Wall Street giant Bear Stearns ushered in a crisis that led to massive bailouts.

Federal Deposit Insurance Corp Chairman Sheila Bair, also speaking at the investors conference, said:

"When economic conditions return to normal, risk aversion on the part of investors will decline and risk taking by banks will return ... Unless we act now on financial reform, we could soon be planting the seeds of the next crisis."

The Senate's bill also includes provisions to make corporate boards more accountable by giving shareholders a way to influence the composition of a corporate board as well as a non binding vote on executive compensation.

Bair defended her agency's move to clamp down on excessive banker pay and said financial stability is at stake.

"The stability of our financial system requires that the interests of management be aligned with all financial stakeholders in the firm - including debt and equity holders - in order to prevent the type of excessive risk-taking that led to this crisis," Bair said.

(Reporting by Corbett Daly, Karey Wutkowski and Rachelle Younglai; editing by Patrick Graham)