–House-Senate Conference Panel Sets First Full Day of Debate
–Panel To Debate Credit Rating Agencies, Thrifts, Hedge Funds
–OTC Deriviatives Regulation Not On Today’s Formal Agenda

By John Shaw

WASHINGTON (MNI) – The House-Senate conference committee on
financial regulatory reform will move into the decision making phase
beginning Tuesday, as the panel begins to consider a raft of issues that
need to be resolved before a compromise bill is achieved.

The House-Senate conference panel first convened last Thursday for
opening statements and to elect House Financial Services Committee
Chairman Barney Frank as the panel’s chairman. Senate Banking Committee
Chairman Chris Dodd is the lead Senate participant.

The panel reconvenes 11 a.m Tuesday to consider provisions related
to credit rating agencies, hedge funds, insurance, and federal bank
regulations.

The question of how to regulate over-the-counter derivatives is not
on the formal agenda Tuesday, but is certain to be discussed during
informal conversations.

Senate Agriculture Committee Chairman Blanche Lincoln continues to
press for a strong provision relating to the regulation of OTC
derivatives.

Her proposal would force banks to spin off their derivatives units
or risk losing access to the Fed’s discount window and FDIC deposit
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 considerable attention — and firm opposition from
banks.

Administration officials and key congressional Democrats have also
indicated they are uncomfortable with Lincoln’s derivatives language,
but have stopped short of frontal public opposition.

Several Democrats have said that the provisions 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.

At this point, Lincoln does not appear to be backing down from the
essence of her plan, but is now offering a two year transition for banks
to prepare for this change.

Lawmakers have said that resolving the OTC derivatives regulatory
issue will be one of the central challenges of the House-Senate
conference committee.

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.

The deliberations will begin by using the Senate-passed bill as the
“base text” of the negotiations.

House leaders named 10 Democrats and six Republicans to the
conference panel. Senate leaders appointed seven Democrats and five
Republicans to the conference committee.

In addition to these conferees, representatives from other panels
will attend sessions that are devoted to sections of the package for
which they have jurisdiction. In total, there are 43 lawmakers who are
part of the conference deliberations.

The regulatory reform bill has more than a dozen sections and the
conference committee will go through each section for discussion and
possible amendment.

Both Dodd and Frank 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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