–House-Senate Regulatory Reform Reaches Accords On Key Issues
–Panel Set To Agree That Consumer Protection Entity To Reside In Fed
–Panel Also Reaches Accord On Debit Card Fees

By John Shaw

WASHINGTON (MNI) – While its televised proceedings have not had a
discernible dampening impact on World Cup ratings, the House-Senate
conference panel on financial regulatory reform continues to work
through a raft of thorny issues and appears poised to complete its
package by the end of the week.

House Financial Services Committee Chairman Barney Frank and Senate
Banking Committee Chris Dodd have said they have reached agreements on
several key matters and expect to tackle the issue of regulating
over-the-counter derivatives Thursday.

The conference panel is expected to ratify Tuesday an agreement to
create a consumer financial protection agency within the Federal Reserve
Board.

The House-Senate panel still needs to decide the precise power of
this entity, with lawmakers trying to resolve if it should be able to
regulate auto dealers and pawnbrokers.

The conference panel is also expected to formally consider a
proposal to allow the Fed to limit the amount banks and card companies
can charge retailers to process debit card transactions, so-called
intercharge fees.

Last week, the panel backed a broader and more intrusive audit of
the Fed by the Government Accountability Office than many senators
sought.

The compromise the House-Senate panel agreed to would allow the GAO
to conduct ongoing audits of the Fed, including the Fed’s discount
window and open market transactions. It would require public disclosure
of open market operations and discount window transactions three years
after the transactions have occurred.

The House-Senate conference remains divided over a House proposal
to create a $150 billion fund to help wind down failed financial firms.

Frank has been pushing this provision, but Dodd has said its
inclusion in the final package would complicate his efforts to pass it
in the Senate.

The issue of regulating over-the-counter derivatives continues to
be a topic of great concern and ongoing discussion. It is expected to
consume much of Thursday’s session.

Senate Agriculture Committee Chairman Blanche Lincoln continues to
push a proposal that would force banks to spin off their derivatives
units or risk losing access to the Fed’s discount window and FDIC
insurance.

The provision which requires a bank which qualifies as a swap
dealer to “push out” its swap desk to an affiliate of the bank holding
company has attracted strong opposition from major banks.

Several Democrats have said that a provision preventing banks from
buying and selling securities solely for the firm’s profit–proprietary
trading — would be a more effective tool to control risk than
preventing banks from trading derivatives.

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

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

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

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