WASHINGTON: With the historic overhaul of US financial rules nearly complete, lawmakers have waited until the final, frantic hours on Thursday, June 24 to sort out the most controversial provisions in the bill.
Democrats in charge of the process appear likely to retain tough restrictions on banks' trading and investment activities that could crimp profits for the foreseeable future.
But with a self-imposed deadline of Thursday evening, last-minute dealmaking could lead to exemptions for mutual funds, manufacturers and other business interests.
The broadest rewrite of Wall Street rules since the 1930s aims to avoid a repeat of the 2007-2009 financial crisis that plunged the economy into a deep recession and led to taxpayer bailouts of troubled banks.
Negotiators aim to resolve differences between versions of passed by the House of Representatives and the Senate in a final session that could last deep into the night.
Success would allow President Barack Obama to hold up the legislation as a model for other economic powers weighing reforms at this weekend's Group of 20 meeting in Canada.
It also would give Democrats an important legislative victory, alongside healthcare reform earlier this year, as congressional elections loom in November.
Whether they can actually get it done remains to be seen.
Negotiators on the panel must walk a tightrope as they resolve the most controversial aspects of the bill, including proposals to limit banks' lucrative swaps-dealing operations and their investments in private equity and hedge funds.
Wall Street has been unable to kill both proposals as Democrats ride a wave of public disgust at the industry over the damage from the financial crisis.
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 Obama.
Notes in every pocket
"I dredge votes on the floor of the US Senate," said Christopher Dodd, a Democrat and the lead Senate negotiator. "I come back and I feel like a bulletin board ' I've got notes stuck in every pocket."
Moderate Republican Senator Scott Brown was at the center of efforts to weaken the "Volcker rule" ' the ban on banks' trading first proposed by White House economic adviser Paul Volcker, according to aides.
Brown has pushed to allow the large insurers and mutual funds based in his home state of Massachusetts to continue their investments in hedge and private equity funds.
The latest compromise floated on Wednesday would allow banks to invest 2% of their core capital in hedge and private equity funds. But it would also strengthen the rule by giving regulators less leeway to interpret it as they see fit.
Senate negotiators have also fought to blunt the impact of new consumer-protection rules on small businesses, a key concern of moderate Republican Senator Olympia Snowe.
Another centrist, Democratic Senator Blanche Lincoln, pushed to force banks to spin off their swaps-dealing operations as she fought a primary election challenge from the left in her home state of Arkansas.
Many analysts had expected Lincoln to quietly drop the provision afterward but she has fought to keep it in and a softened version could become part of the law.
The panel will have to work through more than 100 proposed tweaks to the derivatives crackdown, which aims to tame a US$615 trillion market that exacerbated the financial crisis and led to a $182 billion taxpayer bailout of insurance giant AIG.
Wall Street has deployed an army of lobbyists to fight the measure. With the endgame at hand in Congress, their efforts may soon shift to the regulatory agencies that will put the new rules in place.
A lengthy period of uncertainty could loom for businesses as regulators like the Commodity Futures Trading Commission decide how to proceed, said Joel Telpner, a partner with the Jones Day law firm in New York who focuses on derivatives.
"What we're going to see is another round of intensive lobbying, just as we did as the legislation has been finalised," Telpner said. ' Reuters
Democrats in charge of the process appear likely to retain tough restrictions on banks' trading and investment activities that could crimp profits for the foreseeable future.
But with a self-imposed deadline of Thursday evening, last-minute dealmaking could lead to exemptions for mutual funds, manufacturers and other business interests.
The broadest rewrite of Wall Street rules since the 1930s aims to avoid a repeat of the 2007-2009 financial crisis that plunged the economy into a deep recession and led to taxpayer bailouts of troubled banks.
Negotiators aim to resolve differences between versions of passed by the House of Representatives and the Senate in a final session that could last deep into the night.
Success would allow President Barack Obama to hold up the legislation as a model for other economic powers weighing reforms at this weekend's Group of 20 meeting in Canada.
It also would give Democrats an important legislative victory, alongside healthcare reform earlier this year, as congressional elections loom in November.
Whether they can actually get it done remains to be seen.
Negotiators on the panel must walk a tightrope as they resolve the most controversial aspects of the bill, including proposals to limit banks' lucrative swaps-dealing operations and their investments in private equity and hedge funds.
Wall Street has been unable to kill both proposals as Democrats ride a wave of public disgust at the industry over the damage from the financial crisis.
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 Obama.
Notes in every pocket
"I dredge votes on the floor of the US Senate," said Christopher Dodd, a Democrat and the lead Senate negotiator. "I come back and I feel like a bulletin board ' I've got notes stuck in every pocket."
Moderate Republican Senator Scott Brown was at the center of efforts to weaken the "Volcker rule" ' the ban on banks' trading first proposed by White House economic adviser Paul Volcker, according to aides.
Brown has pushed to allow the large insurers and mutual funds based in his home state of Massachusetts to continue their investments in hedge and private equity funds.
The latest compromise floated on Wednesday would allow banks to invest 2% of their core capital in hedge and private equity funds. But it would also strengthen the rule by giving regulators less leeway to interpret it as they see fit.
Senate negotiators have also fought to blunt the impact of new consumer-protection rules on small businesses, a key concern of moderate Republican Senator Olympia Snowe.
Another centrist, Democratic Senator Blanche Lincoln, pushed to force banks to spin off their swaps-dealing operations as she fought a primary election challenge from the left in her home state of Arkansas.
Many analysts had expected Lincoln to quietly drop the provision afterward but she has fought to keep it in and a softened version could become part of the law.
The panel will have to work through more than 100 proposed tweaks to the derivatives crackdown, which aims to tame a US$615 trillion market that exacerbated the financial crisis and led to a $182 billion taxpayer bailout of insurance giant AIG.
Wall Street has deployed an army of lobbyists to fight the measure. With the endgame at hand in Congress, their efforts may soon shift to the regulatory agencies that will put the new rules in place.
A lengthy period of uncertainty could loom for businesses as regulators like the Commodity Futures Trading Commission decide how to proceed, said Joel Telpner, a partner with the Jones Day law firm in New York who focuses on derivatives.
"What we're going to see is another round of intensive lobbying, just as we did as the legislation has been finalised," Telpner said. ' Reuters
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