–House Financial Services Chief Says House-Senate Talks Will Continue
–Fed’s Emergency Lending Power Will Also Be Reviewed

By John Shaw

WASHINGTON (MNI) – House Financial Services Committee Chairman
Barney Frank said Tuesday the House-Senate conference committee on
financial regulatory reform will consider issues critical to the
oversight and the operations of the Federal Reserve Board.

In a statement on the panel’s agenda for Wednesday, Frank said the
conference committee will consider provisions related to an audit of the
Fed by the Government Accountability Office.

The House bill calls for wide-ranging, intrusive and regular GAO
audits of the central bank, including probes into certain aspects of
monetary policy.

The Senate bill calls for a more limited one time audit of the Fed,
focusing on its recent emergency lending programs.

Frank said the conference committee’s meeting Wednesday will also
consider the Fed’s emergency lending powers, it’s so-called 13(3)

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

The panel Tuesday is considering provisions related to credit
rating agencies, hedge funds, insurance, and federal bank regulations.

The issue of regulating over-the-counter derivatives is not on the
formal agenda Tuesday or Wednesday, but is a topic of central concern
and ongoing discussion.

Senate Agriculture Committee Chairman Blanche Lincoln continues to
seek strong provisions related 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 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

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 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.

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

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

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

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

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