–But Timing Of Senate Vote May Be Complicated By Passing of Sen. Byrd
–Democrats Hoping To Send Landmark Bill To Obama By Week’s End
–Treasury’s Geithner To Testify Thursday on Global Economy
–House Budget Panel To Hold Hearing Thursday On U.S. Economy
–Dems Try To Figure Out How To Pass War Spending, UI Bills

By John Shaw

WASHINGTON (MNI) – Democratic leaders in the House and Senate are
hoping to pass landmark financial regulatory reform legislation this
week, but the death of Democratic senator Robert Bryd could complicate
the timing of what is expected to be a close Senate vote.

Speaking Friday morning, both Senate Banking Committee Chairman
Chris Dodd and House Financial Services Committee Chairman Barney Frank
said they expected the package to pass Congress next week.

Frank said the House vote could occur as early as Tuesday, adding
that he expects it to pass with almost exclusively Democratic votes. “I
believe there will be a majority,” he said.

When the House voted on its initial version of regulatory reform
last December, the bill passed on a 223 to 202 vote, with all
Republicans and 27 Democrats voting against the bill.

Dodd said he expected to need 60 votes to pass the measure in the
Senate and has been in contact with four Senate Republicans who
supported the first Senate version of the bill.

“I feel like we’re in good shape,” to pass the bill in the Senate
next week, Dodd said.

When the Senate passed its version of regulatory reform in late
May, it was approved on a 59 to 39 vote. All Democrats but two — Maria
Cantwell of Washington and Russ Feingold of Wisconsin — voted for the
bill. All Republicans but four voted against it.

The four Republican senators who voted for the bill in late May
were Susan Collins and Olympia Snowe of Maine, Chuck Grassley of Iowa
and Scott Brown of Massachusetts.

Brown said Friday that he did not like several features of the
final bill and did not say if he would support the bill.

Under congressional rules, a conference committee report can not be
amended on the floor of the House and Senate.

While it will only require a majority vote in the House and Senate
to pass, Senate supporters will have to secure 60 votes to cut off the
debate in the Senate.

If this is done, Senate rules allow for an additional 30 hours of
debate, but this time is often yielded back — especially as a holiday
weekend looms.

To avoid any budgetary points of order that could derail the
legislation, Dodd and Frank assembled a $22 billion package of offsets
to pay for the cost of the bill over a decade as estimated by the
Congressional Budget Office. About $19 billion over five years will be
raised through assessments of large financial institutions and hedge
funds. Firms with assets of $50 billion or more and hedge funds managing
assets over $10 billion would have to pay into the fund.

The House-Senate conference committee approved Friday legislation
which would make the most sweeping changes to the U.S. regulatory system
since the Great Depression.

The legislation creates a council of regulators to monitor to
economy against systemic threats. It institutes new regulations on hedge
funds and over-the-counter derivatives. The bill creates a Bureau of
Consumer Financial Protection that will oversee mortgage, credit cards
and other credit products.

The bill provides for expanded regular audits of the Federal
Reserve by the Government Accountability Act.

The package includes a variation of the Volcker-rule, banning banks
from proprietary trading and limiting them from investing in or
sponsoring hedge funds and private equity funds.

It limits bank investments in private equity or hedge funds to 3%
of a fund’s capital. Total investment in private equity and hedge funds
can’t exceed 3% of a company’s tangible common equity.

The bill would push most OTC derivatives through third party
clearinghouses and onto exchanges or electronic trading systems. It
would force banks to push some of their swaps trading into subsidiaries.

Under the bill, banks will be allowed to keep their derivative
trading operations as long as they are used to hedge risk or trade
interest rates or foreign exchange swaps.

The bill will give federally insured banks up to two years to send
instruments such as uncleared credit default swaps off to a separately
capitalized subsidiary.

In other matters this week, Treasury Secretary Tim Geithner will
testify Thursday morning on the global economy before the Senate Foreign
Relations Committee. Among other topics, Geithner is likely to receive
questions about China’s pledge to make its currency more flexible.

The House Budget Committee will hold a hearing, also Thursday
morning, on the state of the U.S. economy. Mark Zandi of Moody’s
Analytics and Martin Baily of the Brookings Institution will testify.

The Financial Crisis Inquiry Commission will examine the role of
derivatives in the financial crisis during hearings on Wednesday and
Thursday. Gary Gensler, chairman of the Commodity Futures Trading
Commission will testify Thursday.

On the eve of the week-long July 4th recess, congressional
Democratic leaders are still trying to figure out how to pass several
fiscal items that are stalled.

Senate Democrats failed last week to secure the 60 votes needed to
pass a $109 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.”

Some senators are urging Democratic leaders to just pass the UI
extension package as a stand-alone bill.

House Democratic leaders are trying 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. However, the package could be trimmed back to assuage the
concerns of some moderate Democrats who are worried about budget

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 FY11 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 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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