Thursday is the last day for conference committee debate on financial
regulatory reform. Both House and Senate
negotiators are seeking to
hammer out the differences between their two bills, determining the
shape of the final measure that, if approved, would be sent to President
Obama for signature. Here's what's at stake in this landmark day in a
months-long legislative battle
to reform the way Wall Street does
business and prevent another crash.
- Resist Lobbyists
Reuters's Andy Sullivan writes of the
much-discussed Volcker Rule and derivatives rules, "Wall Street
lobbyists have been unable to kill both proposals as Democrats ride a
wave of public disgust at the industry over the damage to the economy
and employment from the financial crisis of 2008. Still, the members of
the committee are likely to soften their toughest proposals to retain
the support of centrist lawmakers whose votes will be needed for the
merged bill to clear both chambers of Congress before it is sent to
- Make Derivative Markets Transparent The New York Times calls
derivative regulation "arguably the most important issue for big banks
because real reform will crimp their huge profits from derivatives
deal-making. It also is arguably the most important one for the public.
The largely unregulated, multitrillion-dollar market in derivatives fed
the bubble, intensified the bust and led to the bailouts. Unreformed, it
will do so again. The final bill must ensure that derivatives are
traded on transparent exchanges and processed through third-party
clearinghouses to guarantee payment in case of default."
Banks Have to Spin Off Derivatives Business? The Washington Post's
David Cho reports, "Democratic
leaders pressured Sen. Blanche Lincoln (D-Ark.) Wednesday to scale back a
proposal that would force big banks to spin off their derivatives
businesses, highlighting a conflict that has the potential to crack
Democratic support behind the massive regulatory reform bill as it nears
final passage. ... Her refusal to strike a deal is dividing liberal
Democrats supporting the proposal and moderates who want it removed. The
issue is expected to be in the spotlight Thursday as the House and
Senate seek to reconcile their versions of the bill."
The Loopholes Time's Mark Wilson sighs, "Congress, as
part of the financial reform legislation, is working on an exemption
that would allow State Street to continue creating and investing in the
conduits that nearly led to its demise. ... Welcome to the wonderful
world of financial reform, where rules are set and then quickly it is
determined what firms get to ignore them." Wilson explains past
loopholes and those in the current legislation.
- Prevent Future
Bailouts...and Bankruptcy Reuters' Kevin Drawbaugh explains the delicate dance. "End the idea
that some financial firms are 'too big to fail.' Avoid a
repeat of 2008, when the Bush administration launched costly taxpayer
bailouts of firms such as AIG but did not bail out Lehman Brothers.
Lehman's subsequent bankruptcy froze capital markets." But at the same
time, "Congress wants a middle ground between bailouts and bankruptcy.
would have to keep 'funeral plans' on file that describe how they could
be shut down quickly."
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