–Hill Conference Panel Seeks Accord on Derivatives, Consumer Agency
–Two Senate Panels To Examine U.S-China Relationship
–Treasury’s Geithner To Testify Tuesday on TARP To Oversight Panel
–Dems Try To Figure Out How To Pass War Spending, Extenders Bills

By John Shaw

WASHINGTON, June 21 (MNI) – Financial regulatory reform and the
U.S.’s relationship with China will top the congressional agenda this
week.

The leaders of the House-Senate conference committee on financial
regulatory reform, House Financial Services Committee Chairman Barney
Frank and Senate Banking Committee Chairman Chris Dodd, have said they
would like to nail down a final package this week.

Doing so would allow the House and Senate to pass the final bill
next week, before Congress leaves for its Fourth of July recess. It
would also give President Obama a trophy to take with him to the G-20
meeting in Toronto this weekend.

The House-Senate conference panel is entering its third week of
deliberations and lawmakers are facing difficult challenges to reach
agreements on a consumer financial protection agency and a new regime to
regulate over-the-counter derivatives.

Both the House and Senate passed bills that require most
derivatives to be traded through third parties, but the Senate bill has
fewer exemptions for end-users. Additionally, the Senate version would
force banks to spin off their derivatives units or risk losing access to
the Fed’s discount window and FDIC insurance.

Administration officials and key congressional Democrats have
indicated they are uncomfortable with the Senate’s derivatives language
and are trying to find a workable compromise.

This week’s talks are also likely to focus on reaching an accord on
the so-called Volker Rule which limits banks from buying and selling
securities solely for the firm’s profit.

Two Senate panels will probe the U.S.’s relationship with China,
with the hearings providing lawmakers a forum to react to China’s
announcement that it will institute currency reforms.

Sen. Chuck Schumer, a leading proponent of legislation that would
automatically threaten economic sanctions if Treasury finds that a
trading partner’s currency is “misaligned” based on various economic
indicators, said this weekend that China’s announced reforms are very
modest and will not affect his plans to push his bill.

The Senate Finance Committee will hold a hearing Wednesday
afternoon on the U.S.’s economic relationship with China. Commerce
Secretary Gary Locke and U.S Trade Representative Ron Kirk will testify.

The Finance panel held a hearing two weeks ago on the U.S.-China
relationship, with Treasury Secretary Tim Geithner who said then that he
had seen few tangible signs that China is committed to short-term
currency reform

The Senate Foreign Relations Committee will also hold a hearing
Wednesday afternoon on the U.S.-China relationship, focusing on both
strategic and economic issues.

Last week, the House Ways and Means Committee held a hearing on
China’s trade and industrial policies.

Geithner will testify mid-morning Tuesday on the status of TARP to
the Congressional Oversight Panel chaired by Elizabeth Warren.

Congressional Democratic leaders will try to figure out this week
how to pass several fiscal items that appear to be stalled.

Senate Democrats failed last week to secure the 60 votes needed to
pass a $115 billion package of tax cuts and benefit extensions which the
House recently approved.

The package would extend about a dozen tax cuts that expired at the
end of last year, expand unemployment benefits, and provide an extension
of current Medicare payments for doctors, the so-called “doc fix.”

The Senate passed Friday a six month extension of the doc fix,
sending it to the House for its consideration.

House Democratic leaders are trying to determine when and how they
should attempt to pass an $84 billion emergency spending bill, which
includes $33 billion for the wars in Afghanistan and Iraq and $23
billion to prevent a wave of teacher layoffs.

The Senate approved a $59 billion emergency bill last month which
did not have the teacher funding.

House Democrats might attach to the emergency spending bill a
resolution that “deems” the fiscal year 2011 budget resolution to be
passed, thus setting a ceiling on discretionary spending to allow work
to advance on the FY’11 appropriations bills.

The annual congressional budget resolution sets five year spending
and revenue goals and makes budget deficit estimates.

Congress is required by law by pass annual budget resolutions by
April 15, but this deadline is rarely met. In addition to setting broad
fiscal goals, a budget resolution sets a ceiling on discretionary
spending for the coming year which then triggers work on the 12 annual
spending bills that fund discretionary programs.

House Speaker Nancy Pelosi has signalled that House Democrats will
not try to pass a five year fiscal blueprint this year. She said there
are other ways to meet their responsibility regarding the budget —
presumably by passing the deeming resolution.

** Market News International Washington Bureau: (202) 371-2121 **

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