–House-Senate Conference Committee To Begin Thursday
–House To Name Its Conferees Wednesday; Rep Frank To Chair Joint Panel
–Hill Leaders, White House Want Deal By July 4th Recess
–Under Debate Are Derivatives, Consumer Agency, Type of Fed Audit

By John Shaw

WASHINGTON (MNI) – Now that Congress has returned from its Memorial
Day recess, the process by which the House and Senate will try to
reconcile different versions of financial regulatory reform legislation
has come into sharper focus.

But it still is far from clear how the House-Senate conference
panel will address critical issues such as regulating over-the-counter
derivatives, creating a new consumer protection agency and increasing
oversight of the Federal Reserve Board.

The House passed its regulatory reform bill in December of 2009
while the Senate approved its bill several weeks ago.

The House-Senate conference committee will work to reconcile the
House and Senate regulatory reform bills. Any compromise must then be
approved by the full House and Senate.

Senate Banking Committee Chairman Chris Dodd and House Financial
Services Committee Chairman Barney Frank will preside over the
conference committee when it convenes.

Frank will serve as the conference panel’s formal chairman due to a
tradition in which the chairmen of the Senate Banking Committee and
House Financial Services Committee rotate the chairmanship of conference
panels. It is now Frank’s turn to the chair the joint panel.

House leaders are expected to name their representatives to the
conference, called conferees, on Wednesday. House leaders are expected
to name eight Democrats and five Republicans.

Several weeks ago, Senate leaders appointed seven Democrats and
five Republicans to the conference committee. The Democrats are Senators
Dodd, Jack Reed, Tim Johnson, Chuck Schumer, Patrick Leahy, Tom Harkin,
and Blanche Lincoln. The Republicans are Senators Richard Shelby, Judd
Gregg, Bob Corker, Mike Crapo, and Saxby Chamblis.

Both Dodd and Frank said they would like a final bill to be
approved by Congress and sent to President Obama by July 4th.

To meet this deadline, the White House is now asking the
House-Senate conference committee to agree on a final package by June
24.

The staffs of Dodd and Frank have been meeting to review the two
versions of the bill, identifying areas of similarity between the two
packages and issues in which the bills differ.

Both Dodd and Frank have said they have been struck on how similar
the two bills are, adding that it should not be that difficult to draft
a compromise.

In a recent memo to House Democrats on the Financial Services
Committee, Frank said that he and other senior members of congressional
banking panels will “not be totally autonomous” as they try to reconcile
House and Senate versions of financial regulatory reform.

Frank said the White House “feels strongly about this and I expect
that the House leadership will be engaged more than they were last year
when health care took up much of their time and when they paid us the
compliment of trusting us.”

Frank said the greater involvement of the administration and the
Democratic leadership does not reflect badly on the members of his
committee.

“Their greater involvement will not imply a lack of trust, but
simply the fact that we are down to a few very important issues where
the administration will be strongly expressing its view,” Frank said.

Frank said that since any final agreement will probably require 60
votes to pass the Senate, this will serve as “something of a constraint”
during the negotiations.

Frank added that as the House-Senate conference begins he will meet
regularly with all House Democrats to tell them how the talks are
proceeding and seek their reaction to possible compromises.

Arguably the central issue to be resolved will be how to regulate
the over-the-counter derivatives market. Both the House and Senate bill
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.

Administration officials and key congressional Democrats have
indicated that they are uncomfortable with the Senate’s derivatives
language.

Sen. Jack Reed, a Democrat who will be on the conference committee,
has said the provisions preventing banks from buying and selling
securities solely for the firm’s profit would be a more effective tool
to control risk than preventing banks from trading derivatives.

There is a widespread belief on Capitol Hill that the Senate’s more
restrictive language regarding derivatives will eventually be removed.

The House and Senate bills require expanded audits of the Federal
Reserve Board, but the House version is both more expansive and
intrusive and would include a review of some monetary decisions made by
the Fed.

The two bills also differ on the precise powers of a new consumer
protection entity; the House bill creates a stand-alone agency while the
Senate bill places it within the Fed.

The House-Senate negotiations are expected to occur on two levels.

Dodd and Frank are expected to meet often in private negotiations
over a final bill, with guidance from House Speaker Nancy Pelosi, Senate
Majority Leader Harry Reid, Treasury Secretary Tim Geithner, White House
Chief of Staff Rahm Emanuel — and even Obama.

Frank has said that any decisions made in these private
negotiations will be presented in the public sessions of the
House-Senate conference committee for a final decision. Frank has said
he wants these sessions to be televised on C-SPAN.

It remains unclear what role congressional Republicans will play in
these negotiations.

Even if all Senate Democrats and the two independents vote on a
final compromise, it seems likely the final bill will need at least one
Republican vote to pass the Senate.

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

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