–Dem Leaders Must Decide To Hold Votes Or Refine Conference Report
–Pivotal Senate Republicans Raise Concerns About Bank Tax

By John Shaw

WASHINGTON (MNI) – There is at least a small irony that a sweeping
3,000 page regulatory reform bill, developed over two years, has been
stalled by a relatively modest funding package that was added to the
bill in the final minutes of a nearly 20-hour meeting.

As the long session was winding down Friday morning, Senate Banking
Committee Chairman Chris Dodd and House Financial Services Committee
Chairman Barney Frank offered a $22 billion package of offsets to pay
for the cost of the bill over a decade as estimated by the Congressional
Budget Office.

Under their plan, about $19 billion over five years would be raised
through assessments on 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.

This was added, the lawmakers said, to avoid any budgetary points
of order that could derail the legislation.

“To go to the Goldman Sachs, JP Morgan Chases and Blackstones and
ask them to make a small contribution is reasonable,” Frank said in
defending the funding package just before the overall bill was approved.

However, that funding package has been cited — or seized upon —
by several Senate Republican senators as the reason they are reassessing
their support for the final bill.

Republican senator Susan Collins told reporters Monday evening that
she is not certain if she will support the final regulatory reform bill
that could come before Congress this week.

“I’m still taking a look at it,” she said, adding there are many
elements of the bill that she likes.

But she added that she is troubled by the inclusion of the $19
billion fee on banks that she said was placed in the package “in the wee
hours of the night.”

Collins was one of four Republicans who supported the regulatory
reform bill when it was voted on in the Senate in late May. Her support
is critical if the compromise plan is to pass in the Senate.

Another Republican who supported the initial Senate version of the
regulatory reform bill, Sen. Olympia Snowe, declined to comment to
reporters Monday if she would support the final compromise.

The other Republican senators who voted for the bill in late May
were Chuck Grassley of Iowa and Scott Brown of Massachusetts. Brown said
Friday that he did not like the $19 billion bank fee and declined to say
if he would support the final bill.

Democratic leaders in the House and Senate have been hoping to pass
sweeping financial regulatory reform legislation this week.

However the death of Democratic senator Robert Byrd and the
uncertain voting positions of these Republican senators are complicating
the timing of what is expected to be a close Senate vote.

After a Senate vote on a judge Monday evening, Senate Majority
Leader Harry Reid huddled with Dodd, Senate Majority Whip Dick Durbin
and two Democratic members of the Banking Committee, Sen. Chuck Schumer
and Sen. Jack Reed.

Democratic leaders must make a simple, but difficult assessment:
should they try to push the current package through the House and Senate
this week, delay the vote until Byrd’s successor is sworn in, or revise
the package with different offsets.

Frank told reporters Monday that he welcomes Republican ideas to
pay for the bill.

“My question to them is, do they want to add to the deficit and if
not, is there another way to pay for it. If it’s not an assessment on
the financial industry, how else do you get more revenue?,” Frank said.

When they spoke to reporters Friday morning, both Dodd and Frank
said they expected the package to pass Congress this week.

Frank said the House vote could occur as early as Tuesday, adding
that he expects it to pass with almost exclusively Democratic votes.

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.

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.

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.

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

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