–Senate Banking Committee Chairman: U.S. Still Vulnerable To Crisis
–‘It’s Very Important To Get This Done’

By John Shaw

WASHINGTON (MNI) – Senate Banking Committee Chairman Chris Dodd
said Monday that he will press hard to get the Senate to pass financial
regulatory reform legislation this week.

“It’s important to get this job done,” Dodd said in remarks on the
Senate floor, adding that he backs “a final push to get this job done.”

Dodd said informal talks continued all weekend as senators
considered a number of issues.

“We had a good weekend,” he said

The Senate is gearing up to tackle several contentious issues
related to financial regulatory reform this week, with critical votes
expected on regulation of over-the-counter derivatives, the future
Fannie Mae and Freddie Mac and beefed up auditing of the Federal Reserve
Board.

The underlying bill establishes a new independent Consumer
Protection Bureau at the Federal Reserve Board, creates a process to
liquidate failed financial firms, sets up a council of regulators to
oversee systemic risk in the economy, establishes a regulatory structure
for over-the-counter derivatives, requires hedge funds that manage over
$100 million to register with the SEC and creates a new office within
Treasury to monitor the insurance industry.

The bill, largely drafted by Dodd, has been merged with a package
that was approved by the Senate Agriculture Committee which requires OTC
markets to adopt aspects of the regulated markets such as mandatory
clearing through derivatives clearing organizations and trading on
exchanges or exchange-like facilities.

It has a narrow exemption for commercial “end users” who use
derivatives to hedge against economic contingencies such as fluctuations
in fuel prices, currency and interest rates.

The most controversial features of the package is a provision that
requires a bank that qualifies as a “swap dealer” or a “major swap
participant” to either divest its swap desk or forego access to federal
credit assistance such as the Federal Reserve Board’s discount window of
FDIC deposit insurance.

This provision is certain to be challenged on the Senate floor this
week.

The Senate is also expected to vote as early as Tuesday on an
amendment by Sen. Bernie Sanders that would require a one time
“comprehensive” audit of the Fed’s emergency lending programs since
December of 2007.

The Senate is also expected to consider an amendment by Sen. John
McCain that would require government ownership of Fannie Mae and Freddie
Mac to end in two years. Under the McCain amendment, Fannie and Freddie
would be subject to new capital requirements and underwriting standards.

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

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